From the Founding Editor

EDITORIALAs we begin our third year of publication, it seems timely to review where
we have been, where we are now, how we got there, and where we see ourselves going forward. Many of the articles in this issue reflect the history of
SoL, and others are a reflection of some of the values and culture that underlie
SoL. It seems fitting, therefore, to review some of this cultural history from my
own perspective and indicate how the various articles connect to it.
As many readers know, SoL began in 1991 as the Organizational Learning
Center of the MIT Sloan School of Management. Jay Forrester did his seminal
work on systems dynamics in the school, and some of the key researchers andpractitioners who are working in this field today obtained their Ph.Ds there.
Peter Senge, the founder of the center, continues as a Senior Lecturer and regular contributor to the curriculum. John Sterman, who has been a prolific researcher on systems dynamics, is a Professor and runs the Systems Dynamics
Ph.D. program.
The center’s original industrial sponsors launched a series of highly innovative projects that required a complex mix of research and consulting, a mix
that did not fit comfortably into a university setting. Peter and the governing
council of the center realized that a new form of organization might be needed if the
deeper values underlying SoL were to be articulated in the projects. With the help of Dee
Hock, a new organizational form was evolved, and SoL was created as the new identityof the Organizational Learning Center. SoL is administratively independent of the Sloan

Chronology of Growth
1978 Robert Fritz, Charles Kiefer, and Peter Senge create “Leadership and Mastery,” a three-day executive education seminar that
integrates the concepts and disciplines of vision, purpose, alignment, and systems thinking.
1984 Peter Senge convenes a semi-annual forum at MIT for CEO-level dialogue entitled “Systems Thinking and the New Management Style.”
1987 “Systems Thinking and Organizational Learning” project is founded at MIT.
1988 Early experiments with learning laboratories are begun.
1989 A two-day meeting of the CEO group from the semi-annual forum meet to discuss the creation of a larger learning alliancewith Bill Isaacs, Daniel Kim, and Peter Senge. Seeds for the MIT-Organizational Learning Center (OLC) are planted.
1990 The Fifth Discipline is published. Corporate members decide to launch OLC as an interdisciplinary research center to be housed
at MIT’s Sloan School.
1991 Interest in The Fifth Discipline grows. Companies join OLC as corporate partners and enlarge the collaborative consortium.
Projects called “learning labs” are developed at Harley-Davidson, Ford, and Federal Express. OLC Core Competency Courses
begin. The OLC grows and has 19 sponsoring corporate partners.
1994 A review of OLC is commissioned by the MIT Sloan School.
1995 OLC commits itself to a redesign as a networked alliance.
1997 The Society for Organizational Learning (SoL) incorporates as a not-for-profit and relocates. SoL is to be governed by a council representing its three primary member constituencies, organizations, consultants, researchers. The first SoL Annual Meeting is held and first governing council is elected.
— from the learning history of the Society for Organizational Learning by Hilary Bradbury

REFLECTIONS, Volume 3, Number 1

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SCHEIN
From the Founding Editor

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School, and its membership consists of researchers, consultants, and practicing managers. Several of the researchers are MIT faculty members and continue to be involved in
SoL’s evolution and work.
Reflections: The SoL Journal began in 1997 as an idea from Peter Senge, JudyRodgers, Steve Buckley, Otto Scharmer, and Jeff Clanon. Its formal launch resulted frommy volunteering in 1998 to help the SoL cause by founding a journal that would go beyond organizational learning in attempting to: (1) bridge the three communities of researchers, consultants, and practitioners that made up the total SoL community, and (2)focus on knowledge generation, dissemination, and utilization. Peter Senge, the MIT
Press, and the SoL Council all favored this, and I discovered that the volunteers whowanted to work with me on this project were a dynamite team—Karen Ayas, Steve
Buckley, and Judy Rodgers as the core, Katrin Käufer and Otto Scharmer as a supportive
next layer, and Emily Sper as a talented photographer.
After struggling through the first few issues with Karen’s great help, we realized weneeded a professional managing editor and were fortunate to get Jane Gebhart, former Editor in Chief of the Sloan Management Review, to join us full time. There is absolutely no
doubt that without all of these people, Reflections would not have survived and prospered.
We decided that we needed a diverse editorial board with whom to consult on whatever matters came up and learned in the process of inviting people how important it was
to launch this sort of enterprise. Every person I asked joined the board with enthusiasm
and has been responsive when we have needed help. When we look at the caliber ofpeople on our board and note their willingness to help with Reflections, we realize howvaluable it is to create a new kind of journal devoted to bringing together the communities of practitioners, consultants, and researchers around the issue of knowledge generation, dissemination, and utilization.
None of us at the beginning knew how this would evolve, but the MIT Press, Janet
Fisher, and her staff were enormously helpful in advising us on format, layout, and production. We knew that we wanted to do something different because we had to appeal
to three very diverse audiences. Russ Ackoff reminded us forcefully that the biggest danger in this new enterprise was to become “one more academic journal.”
The original idea was simply to publish papers from each of the communities andget comments on each paper from members of the other communities. We were also
committed to the reprinting of classics and articles that we felt had not gotten enoughattention in their first publication. What we had not planned was how we would manage the balance of themes around learning and change.
The influx of papers and our own meetings took care of that. It became very obvious from looking at certain papers that we could and should build issues around central
themes rather than just printing a quarterly collection of articles. The important insightwas that the themes emerged from the articles, not from our own planning process. We
did not lay out a set of themes to be covered systematically, and we do not plan to do soin the future. We have found it far more useful to let these ideas surface from meetings,
from issues brought up by our potential authors, and from key papers around which wethen build an issue with other papers.
Some themes were clearly suggested by our board, especially “the role of the arts andartists.” Both John Seely Brown and John Kao felt that the learning process was heavily
influenced by the arts, and we needed to explore this systematically. We knew that SoL
was getting heavily involved in “sustainability,” so an issue around that seemed mandatory. But beyond those two themes, the rest emerged out of our own process and the kindsof papers that were submitted. We want to take a leaf out of our issue on the arts in which
we focus on the importance of improvisation. We have had a great deal of fun with “controlled improvisation” and, until our readers tell us differently, we will assume that thisway of working has created a journal that is fun to produce and useful to our readers.

Ed Schein

Volume 3, Number 1, REFLECTIONSEDITORIAL

In This Issue
Edgar H. Schein and Karen AyasW

4e begin this issue on a historical note. Peter Senge’s first major involvement with abusiness organization was his work with the Hanover Insurance Company and its
visionary CEO Bill O’Brien. Much of what we know about and believe in on the topic oforganizational learning was evolved in this early, seminal relationship between Senge andO’Brien. One can see in this story by Barry Sugarman, a research member of SoL, boththe value dimensions that underlie SoL and the research and practice issues that are involved in a complex organizational change. The issues in successfully initiating and sustaining change are underscored in Carol Zulauf’s commentary. Lawrence Brandon andEllen Berezin explore values and virtue at Hanover.
One way of conceptualizing the philosophy underlying SoL is to note that it is allabout building “social capital.” Much has been written about the importance of social
capital, but hardly anything about how to actually do it. Sandra Waddock provides two
excellent examples of how one might go about building such social capital and offers us
a different way to think about a company’s success. As James Post points out in his comment, long-term social performance is as important as financial performance, but very
few companies follow Waddock’s mindful approach.
Going into even more detail, Tim Hickey illustrates this same process from the pointof view of an individual CEO trying to build up an organization that needs some help. It
is very easy to talk about values and value-based management. As Deborah Heller, aseasoned consultant; Göran Carstedt, a former CEO; and Hickey’s own commentary illustrate, it is very difficult to figure out how to put values into practice and to keep valuebased management going as economic and political environments change.
To give a flavor to what is involved in learning initiatives in a SoL member company,
we provide Christine Day’s interview with Nick Zeniuk, who was, at the time, a project
manager, a fully involved “change agent,” living with the day-to-day realities of making
something happen. His retrospective insights provide important perspective on organizational learning projects.
Many of the projects launched by the Organizational Learning Center and later SoL
were wildly successful within the units in which they were launched, but did not successfully diffuse upward and laterally in their home organizations. This failure to proliferate reminds us of an important fact. The values underlying SoL are not today widely
shared in the organizational world. Many of the practices advocated by SoL projects
threaten other cultural values. It would be tempting to simplify this matter by just listing the relevant values. This would be a mistake. Rather, we provide two articles that
attack the problem at a more general level.
These articles address the questions of what is culture and what are some of the
deeper values that reside in different cultures. Ed Schein asks whether organizational
learning is or can be compatible with a philosophy of individual growth and personal
mastery. Philip Ramsey explores directly how some of the deep, value dimensions identified by sociologists at the societal level mesh with the values that are implicit and explicit in SoL. Neither of these articles resolves the issue, and this is as it should be. Ariede Geus and Alain Gauthier bring this message home in their respective comments. But
our readers should ponder for themselves what it is that we are asking organizations to
do when we engage them in these “learning” activities.
What does the future hold? Art Kleiner, and Adam Kahane in his preface, next provide us with several very interesting future scenarios. Inasmuch as one of the major
learning tools that we have come to value is “scenario analysis,” it seems only fitting that
this kind of analysis should be applied to SoL itself. This has been very ably done in a
SoL scenario workshop stewarded by Adam Kahane, J. Jean Horstman, and C. Otto

Volume 3, Number 1, REFLECTIONSSCHEIN AND AYASIn This Issue© Emily Sper

Scharmer. As they remind us, the goal is not to predict, but to use a forward-looking
approach as a vehicle for understanding the forces at play in our world and proactively
creating our own future. Scharmer and Horstman augment the article with their comments. We invite our readers to join with us in thinking about possible scenarios for SoL.
Peter Senge contributes his own views in From the Chair.
Learning and change are complex processes, especially when advocated at the organizational level. We hope the range of articles in this issue will provoke further
thoughts and comments from you, our readers. Please send your remarks tojane@SoLonline.org.

Erratum
In the Spring 2001 issue, volume 2, number 3, page 46, the title of Richard Axelrod’s bookshould be Terms of Engagement.
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REFLECTIONS, Volume 3, Number 1

Contributors

6

Betty Alexander is a graphic facilitator with Generon Consulting.
Ellen Berezin is vice president, human resources, Lifeline Systems, Inc., leaders in the fieldof personal response systems focusing on the disabled and elderly. Formerly she was ahuman resource manager at Hanover Insurance.
Hilary Bradbury is an assistant professor of organizational behavior, Weatherhead School ofManagement, Case Western Reserve University.
Lawrence G. Brandon is chairman of The American Institute for Chartered Property and Casualty Underwriters and the Insurance Institute of America.
Göran Carstedt is a former executive at Volvo and IKEA. Since 1998, he has been leading thecreation of the Global SoL Network.
Linda Cooper is a photographer based in Evanston, IL. <svcguru@mcs.net>
Christine R. Day is a Business Solutions Partner at Ford Motor Company’s Fairlane Training
and Development Center. She also teaches part-time in the MBA program, College ofBusiness, Eastern Michigan University.
Arie P. de Geus is a former executive at Royal Dutch Shell and currently a visiting fellow at
London Business School.
Alain Gauthier is executive director of Core Leadership Development in Oakland, CA. He isa founder, key facilitator, and chair of the Development Committee of SoL France, and amember of the executive committee of the Global SoL Network.
Deborah Heller is a founder of HellerCunningham, an organization development consulting
practice.
Tim Hickey is a vice president of Columbia Ultimate, a software company providing solutions
for accounts receivable management and collections.
J. Jean Horstman is a member and former managing director of the Society for Organizational Learning.
Adam Kahane is a founding partner of Generon Consulting. He works around the world withcorporate and civic leaders who aspire not just to adapt to the future but to shape it forthe better.
Art Kleiner is a writer, scenario planner, and teacher.
Bill O’Brien is retired CEO, Hanover Insurance Companies, and partner emeritus, GeneronConsulting.
James E. Post teaches business and public policy at Boston University.
Philip L. Ramsey lectures on organizational learning at Massey University in New Zealand.
C. Otto Scharmer is a visiting lecturer, MIT Sloan School of Management; lecturer, University of Innsbruck, Austria; and research partner, Generon Consulting.
Edgar H. Schein is a Sloan Fellows professor of management emeritus and senior lecturer at
the Massachusetts Institute of Technology.
Peter M. Senge is a senior lecturer at MIT and chairperson of the Council of Trustees of theSociety for Organizational Learning.
Emily Sper is a photographer, graphic designer, and author-illustrator in Boston, MA. Her
photographs have been exhibited in the US and abroad. <www.sperphoto.com>
Barry Sugarman is a social scientist. For 20 years a professor of management and also a manager in the nonprofit sector, he is now SoL Research Coordinator.
Steven J. Waddell is an action researcher who focuses on generating knowledge about and developing business-government-civil society collaborations, large networks, and global systems.
Sandra Waddock teaches strategic management and social issues in management at Boston
College’s Carroll School of Management. Her newest book is Leading Corporate Citizens:
Vision, Values, Value-Added (McGraw-Hill, 2001).
Nick Zeniuk is a former executive at Ford Motor Company and a founding member of theSociety for Organizational Learning, serving on its Council of Trustees.
Carol Ann Zulauf is associate professor, Adult and Organizational Learning, Suffolk University, and president, Zulauf & Associates.

Volume 3, Number 1, REFLECTIONSTwenty Years ofOrganizational Learningand Ethics at HanoverInsurance: Interviews
with Bill O’BrienFEATURE

Barry SugarmanThis story of a business turnaround is also a story of organizational and personal transformation.1 New leaders revived a moribund business, HanoverInsurance, by emphasizing ideas, purpose, and values in order to engage andenergize employees. Significant improvements in business results were seen
after only one year and continued to accelerate for more than 20 years. During
these years, Hanover’s top leaders continued to promote change processes,
based on their conviction that fuller use of their employees’ human potential
was the key to their business success. They had an equal conviction that the
typical work environment of bureaucratic mediocrity, office politics, and lackof work satisfaction was anathema and ethically unacceptable. This case isabout change management, human resources as a strategic key, leadership,transformation, and ethics; each is an integral part of the Hanover story.
In 1969, Hanover Insurance was one of lowest performers in its field, acompany resting comfortably at the bottom of the industry. But by 1984, it had
climbed to the top quartile. President Jack Adam, appointed in 1969, and his
new vice president of marketing, Bill O’Brien, had spent 10 years developing
what they later called a “values-based culture” and reviving business performance dramatically. O’Brien says, “We redesigned the culture from one thatwas command and control to one that was vision-driven and values-based.”By 1979, when O’Brien took over the role of president, Hanover had been
consistently outperforming the industry average during the previous decade.
The bad news was that the whole industry was entering a very difficult period
due to the “tort explosion,” with courts making large, escalating damage awards
against insurers. However, the good news was that Hanover’s continued creative
efforts to make still deeper changes during the next decade led to an increased
lead over its competitors. Facing this additional challenge, in its second decadeof change, Hanover began making serious use of systems thinking instead ofjust traditional problem-solving by linear cause-and-effect thinking.
In 1982, O’Brien met Peter Senge; the two learned much from each other.
Senge taught Hanover to apply systems thinking to managing its tough businessproblems, and O’Brien and Hanover showed Senge what a real learning organization looked and felt like—and what was required to cultivate one (Senge,1990). O’Brien commented, “The advent of Peter brought us on a journey to

REFLECTIONS, Volume 3, Number 1

Barry Sugarman
SoL Research Coordinator

7Bill O’Brien
Retired CEO
Hanover Insurance Companies
Partner Emeritus
Generon Consulting© 2001 by the Society for Organizational Learningand the Massachusetts Institute of Technology.

SUGARMAN
Twenty Years of Organizational Learning and Ethics at Hanover Insurance

8

Carol Ann Zulauf
Associate Professor
Adult and Organizational Learning
Suffolk University
President, Zulauf & Associates

Commentary
by Carol Ann Zulauf

It is just plain exciting to read about an organization that has undergone and sustained profound transformational change.
This case study is as much about theleadership at Hanover as it is about thecompany’s 20-year journey of change,learning, growing, working through challenges, and becoming a learning organization. The change process usually happens
when people, deep within themselves, havea glimpse—perhaps a vision—of what theywant to do, some picture or image of what
they want to accomplish or have happen forthemselves or for others. Frequently, if thisimage were parsed, we’d see that values,
dreams of leaving a legacy, and a vision of
success are part of the foundation of thisdriving force.
O’Brien was the prime catalyst in thetransformational change at Hanover. His
personal values of believing that “each human life is special and has a unique purpose,that all work has dignity, and that work andfamily are the principal platforms for human growth” became the platform ofchange at Hanover (O’Brien, 2000). Here is aleader whose congruent beliefs and actions
fostered an environment based on trust, inquiry, and fruitful relationships.
What does it take to change the culture
slowly at a company such as Hanover? Whatkind of leader is needed? Fisher et al. delineate
the stages of personal growth—opportunist,
diplomat, expert, achiever, individualist, strategist, magician (Fisher et al., 2000). O’Brien was
at least at the strategist stage (if not the magician stage!). Fisher et al.’s research has foundthat “only about 10% of managers are . . . atthe [strategist] stage” (p. 112).
In addition to the stunning financial
growth at Hanover, as measured by the
combined ratio, market capitalization, andits improved standing among other property
and casualty insurance businesses, anothermore learning, systems thinking, advanced work on conversation, and an introduction to scenario planning.”
The story of this business turnaround is remarkable in several ways. First,
as early pioneers, its leaders really did, in the old cliché, “make it up as theywent along.” There were no publications on organizational change management to help them. Through this pioneering work, O’Brien earned a role as afounder of “the learning organization.” Second, the two principle leaders,Adam and O’Brien, maintained a sustained effort over two decades to explore
and experiment with methods based on certain deeply held values and beliefs.
Third, these change leaders were deeply committed to both profit and ethicalvalues. They considered profit and values essential to each other.
They did not start out with any such notions, however; they were pragmatists, not ideologues with a point to prove; businessmen with a company torescue; and decent individuals with some firm ideas about good and evil. SaysO’Brien, “We didn’t start out to create a culture or to be a learning organization. Our starting point was a high level of frustration at the waste of humantalent. We thought that the politics, the bureaucracy, and all the bullshit was abad environment for our people and that they were working at 30% of theirmental and imaginative capabilities, quality of thinking, and spirit.”

Intent of the Change Initiative
According to O’Brien, the intent of their change initiative was “to improve thefinancial performance of the company, to move from the bottom of the industry to become recognized for excellence. We didn’t set out to build a culturethat helped people to grow. We started out to make the company operate better, but we always believed that it would operate better if we had a culture that
helped people to grow and that also served the customer. At that time, there
was little business literature on the customer, and there wasn’t the deep commitment to quality for the customer that there is today.”O’Brien’s thinking developed, fueled by his talks with Adam and endlessconversations as he spoke to groups of employees about the importance of values and vision in the business. Later, in the interviews for this case study,
O’Brien explained his thinking. While learning was important to him for building a stronger company, the quest for more “virtue” was his most important goal:
I had a deep frustration with the way large organizations hired people out ofschool, full of ideals and energy to make a contribution, and, because of bureaucracy and organizational politics, the vast majority of them became empty
shells, counting the days and years to retirement. I didn’t think it was a learning
issue; it was more a virtue issue. I thought it was too much politics, too muchkissing ass, too much lying, too much putting spin on everything. Really enormous doses of selfishness—and not just at the top, but my department versus
your department. I saw the infections in the corporation as inferior virtue. So I
looked for the eternal truths or values that would elevate behavior above thoselower things. If we had a profile of the Fortune 500 companies, I think theywould have both a virtue deficiency and a learning deficiency, but that the firstwould be much bigger than the second. My roots come from Christian beliefs
and the street. My bias is that companies have a big need for values and virtue,
because that can turn on the entire workforce.

Goals of the Hanover Effort
At the start of the first decade, Adam and O’Brien’s goal for Hanover was to bein the upper fourth of stock insurance companies, as measured by combined
ratio, and to grow at 1.25 to 1.5 times the industry growth rate. At the start ofthe second decade, O’Brien raised the goal to the upper quarter of all insurancecompanies (not just stock companies, but including the mutual insurance com-Volume 3, Number 1, REFLECTIONSMethods for Enabling Learning and Change
The primary change agents at the beginning of the turnaround were Adam andO’Brien. Their method at the beginning was to talk to employees about the purpose of the company, about values, and about vision—the leaders’ vision andwhat that meant to employees. At first, it was mainly “teaching and preaching,”
but as they gained more experience in engaging employees in these discussions,
there was more give and take. The values and the company philosophy wereintroduced in classes and all kinds of meetings. In monthly bulletins to employees and annual reports, Adam and O’Brien would also write frequently about
values and how they applied. There was a good deal of trial and error.
O’Brien commented:

SUGARMAN

key factor stands out: increased “intellectual
current.” Can you imagine employees talking
about unintended consequences instead ofjust the rule books? This change in people’s
thinking and actions (that is, conversations)
supports how systems thinking can become
incorporated within organizations. Peter
Stroh also illustrated how a client enthusiastically adopted the idea of unintended
consequences as a way to manage his business (Stroh, 2000).
Sugarman nicely sums up the results ofthe transformational effort at Hanover, aperiod of sustained, renewed improvement
achieved by unlocking the human potentialof employees. How can each one of us attain our next stage of growth, both personally and professionally, as O’Brien did?

Twenty Years of Organizational Learning and Ethics at Hanover Insurance

panies as well). Both Adam and O’Brien were also committed to making
Hanover a profitable business by making it a better company—better in thesense of Aristotle’s virtue—a company that people could feel good about working for. Success, for them, was defined as achieving both goals.
In 1985, Adam stated, “More than anything else, I wanted to lead in thecreation of the kind of company I had always wanted to work for and never
could find. I wanted to help build a corporate family where we let people use
all their abilities, where we let people help build an outstanding organization.
I felt if we could build this kind of an organization, we could attract able
people who not only would grow and achieve their own abilities and desires,but would help others to grow and achieve” (Adam, 1986).

References

Fisher, D., D. Rooke, and B. Torbert. Personal
and Organizational Transformations
Through Action Inquiry (Boston, MA:
Edge\Work Press, 2000).
O’Brien, B. Commentary. Reflections 2(2000): 7.
Stroh, P.D. Response. Reflections 2 (2000): 66.

In 1970, we didn’t have a philosophy. The first thing we did was lay out a purpose. We had some people on a task force to talk about what the purpose
should be. We would write about the purpose. Then for a period of time, wetalked about a lot of principles, most about fighting the diseases of politics andbureaucracy. We said, for example, that “Human judgment should always transcend procedures.” If the procedure guide says “do X,” and you’ve thought about
it and you think A is better, then do A. We had about 25 slogans like this. Another was, “Substance will always transcend appearance.” People were asking
themselves, what’s the slogan this month? These things weren’t coherent orconnected. So in 1978, I took a couple of days off, sat down with a big accounting pad, and put things across the top and the bottom. I reduced these things to
the seven values that we stand for.
Jack liked them but was afraid we might be getting too far ahead of thetroops. He said, “Why don’t you take them to the next direct-report meeting andtry them on the group?” I got a long, respectful silence, but not approval. I let it
drop. I didn’t know what to do. In subsequent meetings, whenever we’d get toknotty issues, people would say, “That comes back to what you talked about acouple of months ago, Bill. It’s those values.” So we scheduled another damnpresentation, and they coalesced around the idea. That’s
how we got those values: merit, openness, localness, leanness, what we believe about people, responsibility to the[insurance] agents, and responsibility to the customers.

REFLECTIONS, Volume 3, Number 1© Emily Sper

Later, other change agents were brought on board. Chris
Argyris was the first outside consultant and the only process consultant. His work was about conducting more effective conversations. Peter Senge, the second consultant,
was an expert on systems thinking. Later, Lee Bolman (anexpert in organizational culture) and others conducted extensive training sessions (especially a three-day course
called “Merit, Openness, Localness”). All professional andmanagerial employees were eventually included.
O’Brien commented, “We did a lot of education, notjust on technical insurance. It included the skills of effective

9

SUGARMAN
Twenty Years of Organizational Learning and Ethics at Hanover Insurance© Emily Sper

conversation and critical thinking (along the lines taught by
Argyris). I have found very few executives who can get up
and talk about ideas. We developed a group of executives(particularly Jack and myself) who were constantly explaining the ideas behind the company. And we wrote a lot about
our philosophy and how it applied to current issues.” Behind these methods lies O’Brien’s belief in the power ofideas and his frustration that “too many companies are governed by mediocre ideas.”
In the first decade, there was no philosophy department. But, in 1981, Hanover hired a “vice president of philosophy” (Tom Grimes). He taught systems thinking andthinking about thinking (drawing from a course on Easternand Western thought by Professor John Becket at the University of New Hampshire’s Whittemore School of Business).
Later, the philosophy department included three people. O’Brien commented:
We were constantly running people through one-, two-, or three-day workshops
in their offices all over the country. By the mid-eighties, it was right down to thetoenails of the company.
We came back to the values and vision in every major meeting. And wewalked the talk. For example, leanness meant that I traveled coach; openness
meant that when we had bad news, we told it to the employees. There was no
spin put on messages to our customers or our agents; we talked straight. The
process was informal, but it came down to preaching and practicing. Whenever
there was a meeting, we always came back to “What is our vision? What are ourvalues? How does our purpose tell us what to do?” At first, people thought thephilosophy was separate from the business; we had to struggle to integrate it.
One of the jobs of the CEO is to make sure the music has got all its parts andinstruments, including the cultural ones, the values. Otherwise, the drumbeat ofbudgets and so on will dominate the music of the company. If all the meetings
are about financials, all the music about culture and uplifting people will disappear. Bringing in a consultant to do an offsite won’t do it. The CEO has got tomaintain the meld of the ennobling corporate principles in the corporate diet.
He can believe it and want it, but if he doesn’t build in that subject, meldedwith the sales, finances, and engineering, it won’t happen.

What anchored these efforts for O’Brien was his strong sense of what waswrong with the situation:
10

Back in 1971, everyone took a warped version of Adam Smith and imagined thatmaximum greed would work out the best for the common good. The only stakeholders were the stockholders. We were one of the first companies to challengethat [Adam, 1973]. I remember that we got some negative
stockholder reaction. But we thought that if we had an ennobling purpose, something of interest to the employees, it would
make our company more purposeful. Our expectations were
exaggerated. People initially had a favorable reaction but it
didn’t really change behaviors. When I became president in
1979, I was frustrated because purpose was not tapping in asmuch as it should, even though the company had improved
quite dramatically since 1971.
I talked to every single employee in the company in groups, and I laid out myvision for Hanover—where our roots had been, the current reality, how westacked up against competitors. Then I talked about my dream. When I was done,
I said, “It’s not my dream that’s important. It gets me out of bed each morning to
go to work to build what I want to build, but it doesn’t do anything for you.” I encouraged them to work on their vision. It was the first time we extended our purpose to vision, as an important ingredient to get people to become purposeful.

“One of the jobs of the CEO is tomake sure the music has got all its
parts and instruments, including thecultural ones, the values.”

Volume 3, Number 1, REFLECTIONSSUGARMAN

What O’Brien had discovered was that other learning methods would beneeded to continue Hanover’s growth toward fulfilling his aspirations and becoming more of a learning organization. He continued:
I saw the potential of systems thinking helping us to arrive at a deeper understanding of complexity and hence to making better decisions. What I remember
clearly is a series of people I met, Peter Senge, Jay Forrester, and John Beckett.
Peter brought in this guy from Digital, a former academic who understood systems thinking. And he took us through an issue that his division was handlingup in New Hampshire using systems thinking. And I said to myself, “My god,
it’s so much clearer.” If I took it to the second step and asked, “Now, how do I
use systems thinking to make better decisions so I can make money?” I probably couldn’t answer it. But I valued that more complete understanding of complexity and I had faith that if I understood more about the complexity that mycompetitors and I were facing, I would eventually have a competitive advantage. I think that was the difference between me and some other people who
were exposed to systems thinking.
It’s like learning to diagram a sentence in the fifth grade and mastering theEnglish language. That’s half the battle of life—learning the language. I had thatfaith that if I could see the problem clearer than my competitors, I would comeup with better answers. Half of what we learned [in systems thinking] wasn’t
how to solve a problem; it was how to avoid making it worse.

The role that systems thinking played in the success of Hanover is deepand subtle, according to O’Brien. At one level, that role may be understood
through the way it was applied in the “claims learning laboratory”—a computer-based simulator in which learners could experiment with making decisions such as how much to spend on training claims adjusters, while they
watched the effect of their decisions on other measures, such as quality ofwork and employee turnover (Hanover, 1986). This illustrates one way inwhich systems thinking helped Hanover people to understand better the systematic nature of their business—through concrete causal links between one
element and another. At another level, however, the influence of systems thinking at Hanover goes deeper and is harder to define. Concisely, using languagethat O’Brien does not care for, I think he is saying that systems thinking affected their way of being which had important consequences for the company.
When the insurance industry faced the 1980s, with tort liability explosion,
escalating litigation and losses, conflict, and profound imbalance, a significant
number of Hanover people were able to see it as a system in upheaval, without
demonizing other players. They were also able to see fresh business opportunities in the turmoil; for example, Hanover became the administrator (contracted
to the state) of the newly swollen “assigned risk” pools of high-risk (undesirable)
insureds in Maine and New Jersey. The Hanover managers at the state level (nothead-office hot shots) were successful in two ways: along with conceiving entirely new lines of business, they succeeded in winning the trust of top state officials and were awarded (and re-awarded) very large (and profitable) contracts.
O’Brien believes there was something special about the systems thinking
mind-set the Hanover managers had cultivated. Beyond the greater clarity it
gave them to see the systemic links, it seems that the big-picture, nonparochialsystems view can position people differently in relation to their world. It cantake a person beyond the narrow assumption that “my position is myself” andREFLECTIONS, Volume 3, Number 1

Lawrence G. Brandon
Chairman, American Institute for
Chartered Property and Casualty Underwriters
Insurance Institute of America

Commentaryby Lawrence G. Brandon

It is fairly common to find an academic article espousing the importance of values
and virtue in an organization. It is far moredifficult to find a CEO willing to implement
these thoughts in daily operations. O’Brien
was clearly one who did so. He steadfastly
held to his beliefs, through the good times
and the challenging times, in the face of
criticism from industry peers and initialskepticism from colleagues. The results
achieved by his organization serve as testimony to the wisdom of his approach.
At first, Hanover Insurance and the philosophical leanings of Adam and O’Brien werethe laughing stock of the insurance industry.
Other executives ridiculed them for their efforts to turn an organization around bychanging its vision and values, rather thanradically changing its personnel, policies,
and procedures. Others believed Hanover
would be better served by eliminating jobs
and personnel and replacing executives withpeople who were more financially astute.
They saw Hanover executives as “lightweights,” overmatched by the task confronting them. They typically cited examplesof other insurance organizations that failed
under inept executive leadership.
I clearly remember a statement by Adamand O’Brien that appeared in industry publications back in the early 1970s. They said,“Any organization in business to make aprofit will end in failure. Any organization inbusiness to render service will make aprofit.” The CEO of the insurance organization I was with at that time said that quote
was “the damndest thing I have ever read.”
He affirmed that our organization was “inbusiness for two reasons, and two reasons
only—to make a profit and to grow—and,gentlemen [we were all men in the executive ranks then], don’t you ever forget it!”That organization was about six or seven

Twenty Years of Organizational Learning and Ethics at Hanover Insurance

At the same time, we had identified the diseases and adopted the values, whichin effect were antibiotics to the infections. Those two things, vision and values,
gave us a culture that brought people to a point where they could implement what
we already knew, better than our competitors. At that point [1982], when we were
getting to be a mature, vision-driven, values-based company, I met Peter Senge.
The industry was running into problems that no one had figured out, and the old,
linear cause-and-effect mentality was producing painful, unintended consequences.

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Twenty Years of Organizational Learning and Ethics at Hanover Insurance

12times larger than Hanover and much more
profitable in the early 1970s. Today, that organization no longer exists and Hanover Insurance is still going strong! Who, indeed,
was the damn fool?
O’Brien’s deeply rooted faith allowed him
to pursue the best in life by recognizing thefundamental goodness of others, whether
they were fellow employees, agents, customers, or competitors. He believed inpeople and never underestimated the human and divine potential of all God’s creation. By “walking the talk,” despite hearing
voices of dissention, he and his people
achieved results that were unheard of andunequaled in industry circles. It is indeed
unfortunate that, after 25 years of provensuccess for his methods, his career came toan end because he refused to return to theshortsighted, strictly quantitative approachof new executives in Hanover’s parent organization. He firmly believed that their insistence on a change in direction would
devalue the human potential he had unleashed in the organization and change theamount of satisfaction people would experience from their work. He wanted no part ofsuch action and, true to his own values,
walked away from the nonsense.
Years later, O’Brien’s beliefs and spirit stillpermeate much of the Hanover organization. His ideas have not been silenced, inspite of clear efforts to do so. Hanover is
producing superior results today because
people still believe in themselves, as a resultof O’Brien’s belief in them when he was at
the helm. His love for others is stronger
than the current executives’ greed.

out of the prejudiced view that everyone whose behavior is not favorable to myinterests wishes me harm. The systems thinker understands that many consequences are not intended or even expected by those who cause them, so he or
she is less inclined to blame or demonize other players. O’Brien does not careto call this a modified “way of being,” but he would call it an “aura” that canmake people more attractive partners in a high-risk venture where trust is essential. He is convinced that the contribution of systems thinking can go beyond improved cognitive insights. I think he is identifying a force moving in therealm of ethics (a less self-centered view of the world) and in the realm of ontology—the “being” word again.
Returning to his historical overview of the Hanover transformation,
O’Brien explains how systems thinking arrived at the company.
Our vision and values approach had enabled us to execute effectively what wealready knew, but it did not help us to figure out the “divergent” issues. That required the application of systems thinking. When I met Senge and learned aboutsystems thinking from him, we each saw that the other had the missing piece(“the truth”) that he had been seeking. I needed what he had, and Senge admired greatly the workplace culture at Hanover.
We got very excited about the idea of learning and the idea of augmenting linear thinking. Senge gave us scaffolding on which we could formalize systems
thinking. He, in turn, became intrigued with our culture. He came into our company and found that it had a learning atmosphere. He told me that in most companies, he would spend two-thirds of the day cutting through the games and all
the crap, but here we open a conversation and people are right into it. That was
the beginning of the second decade. We were both ready.

Transformation
I asked O’Brien what specific shifts in work processes and practices, such aschanges in meetings, goal-setting, or performance assessment, had occurred.
He replied:
When a company transforms itself, 90% of that transformation takes place inside the people and 10% is process change and reorganization (I’m pulling thesenumbers out of the air). In defining the inner change in people, we could use
Argyris’s ground rules for conversation: don’t engage in a conversation to win;
engage in it to genuinely learn; don’t forget to inquire into what other people
think; don’t just advocate your views, as managers tend to do; decision making
should be free of “political paint,” that is, self-interest.
The natural, innate being of people is generally good, but if you take a culturethat reinforces being good, it’s even better. Part of that is recognition and part issocial stigma. We didn’t intentionally put it in there but if somebody was in asession and they are obviously negotiating for their self-interest or their turf,
they worry about what their peers are thinking about them. We had establishedcertain standards that disapproved of that kind of politics and bureaucracy.
There was an expectation of a certain level of behavior, and managers felt it.

The creation of this company culture that O’Brien describes, reinforcing social
norms and expectations that support the behavior and thinking patterns of a(virtuous) learning organization, represents an enormous accomplishment.
The new culture that supports learning acquires a forward momentum of its
own, as he describes in the next section.

Changes in Processes or Practices
O’Brien had more to say about process change:
When we started adopting Argyris’s principles, emphasizing inquiry as well as
advocacy, thinking in terms of learning rather than winning, the change in pro-Volume 3, Number 1, REFLECTIONSSUGARMAN
Twenty Years of Organizational Learning and Ethics at Hanover Insurancecess or practice happened. When we adopted localness and took out some of the
management levels and reallocated authority, that was a change in process. And,in personal growth. It was all evolving. The intellectual current in the company
was so much higher by 1980 than it was in 1970. The conversation in the seventies was about what the rule books said to do. The conversation in the eighties
was: What are the unintended consequences? What are the implications? Afterbeing educated in conversation and critical thinking, people started thinking,“This company really cares about me. I’m having richer conversations with mywife, my kids. I read the paper and I see issues more clearly than I did before.”
But for some employees, there was an unfortunate side to this culture change.
When the intellectual currents got faster, a fair number of people didn’t want totake the risk. Over time, they decided to leave, or they were asked to leave.
When you had a company in the seventies that was a political, bureaucraticenvironment, it was a pick-and-shovel, one-by-one job of getting people turned
on. Then in the middle eighties, we were hiring people who just picked it up
from the person sitting next to them. There was an osmosis effect. I couldn’t understand why it had been so hard to get people on board ten years before. They
thought it was terrific; they really had the words and the music. That was thedifference between the seventies and the eighties.

Diffusion of Culture
O’Brien discussed the change in culture:
In the early seventies, the philosophy got kind of bottled up in the home office,and the further you were from the home office, the less people understood it. In
the late seventies, the general managers, especially those in the home office, had
an intellectual grasp of the subject, and they’d go out to the branches. They’d be© Emily Sper

13

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SUGARMAN
Twenty Years of Organizational Learning and Ethics at Hanover Insurance

the only people in the branches who knew the philosophy, but not deeply
enough to be good missionaries. Later, our philosophy department would sendin supervisors. The name “philosophy department” began as a joke or nickname
but soon it became standard usage around the company. Pretty soon we were
getting a critical mass in Chicago, in Oklahoma, in Texas. If I were doing thisagain and had the capital, I would have done it earlier. Back then, this was all
experimental. Top managers take almost a year to get comfortable with the extent of change from command and control. By 1981, we were confident that we
had a mature, values-based, vision-driven organization.

14

Changes in Business Results
While the implications of this case apply to many industries and arenas,
O’Brien’s success depended to a significant extent on his understanding of thefundamentals of the insurance business. He explained:
Ellen Berezin
Vice President, Human Resources
Lifeline Systems, Inc.

Commentary
by Ellen Berezin

Most employees want meaningful work. To
the extent that virtue in business provides ameaningful work environment, the connection and necessity of virtue in businessseems clear where the performance and retention of the workforce is critical to thesuccess of the enterprise. 1
There may be situations in which competition is minimal or nonexistent, or where
profits are so easy to achieve that, in the
short term, the quality and productivity of
the workforce seems relatively unimportant.
However, in the long term, virtue, which I
am defining as that which is perceived as
admirable and worthy, makes the work
worth the effort. I propose that a business
entity with effective virtuous values has an
excellent chance of becoming an employerof choice and surpassing its competition in
attracting and retaining high-caliber people.
Given the costs of turnover, the company
that easily attracts and retains employees
most likely increases its profit margins.
Collins and Porras chronicle the histories
of successful, enduring companies. They
conclude, “Our research showed that a fundamental element in the ‘ticking clock’ of avisionary company is a core ideology—corevalues and a sense of purpose beyond justmaking money—that guides and inspires
people throughout the organization and remains relatively fixed for long periods oftime” (Collins and Porras, 1994).
My profession is human resources management. I spend a good part of my work
life trying to attract, retain, and motivate
talented individuals. Jack Adam and Bill
O’Brien intuitively understood the connection between employee retention and theimportance of meaningful work (mission/
vision/values). Interestingly, many of the

Combined ratio is the key business measure in insurance, a combination of what
the company pays out in losses and overhead—in other words, profit and loss
on the underwriting. The insurance company also gets a free float of a lot ofmoney to invest. So underwriting plus investment gives net profit or loss.
During the years 1978 to 1993, McKinsey & Co. tracked the property and casualty business on combined ratio. It considered us as one of the nine great underwriting companies, in the upper quarter of the 36 companies measured. Of thatnine, six had already been in that group at the start. We were one of three that entered that select group, and we did it coming from the bottom of the industry.

Hanover annual reports give additional data that documented significant improvements in performance—not merely relative to the company’s own
baseline, but relative the industry as a whole. Hanover consistently improved
its performance ranking relative to its competitors over this 20-year period.
Starting at the back of the pack, it moved up to average, then moved well aheadof average, up into the top quartile. In the five years before 1969, Hanover was,on average, 5.5 points worse than the industry average. By the early 1970s,
Hanover began to outperform the industry by consistently widening margins.
From 1983 to 1986, Hanover’s combined ratio was 6.6 points better than theindustry average. In 1970, the stock was about $4 per share; when O’Brien became president, it was $5.76; when he left it was $39. By contrast, The Travelers’ stock price stayed flat. The market capitalization of Hanover increased
from1969 to 1986 by 1,783%, while the average rate for all property-casualty
companies during the same years was 779% (Hanover, 1986).

Causes of Success
The Hanover data are convincing evidence of its success. The company had
improved its business performance dramatically. From 1978, its growth rate
outpaced the industry average. Not only did it make more profit and build up
its capital worth year by year, but it improved its standing relative to otherfirms in the property and casualty insurance business (Hanover, 1986). This
rules out the possibility that the improved results could be due more to the rising tide of an easier business environment than to internal improvements. Generally, performance standards in a competitive market drift upward. Just to
hold a relative standing, a company must improve at least as much as its peers.
Hanover clearly did better at what it did—even more so than its peers. Whatgets the credit for causing that improvement?
In the first year after Adam took over, Hanover’s results relative to the industry average improved noticeably. What causal processes could have operated so quickly? The refreshing effect of new leadership, with many visible
changes in behavior and style after many years under a tired “old regime”?

Volume 3, Number 1, REFLECTIONSContext
Some aspects of history and context may have helped to shape the Hanoverstory. Adam and O’Brien started the work of transforming Hanover. “We werekindred spirits,” says O’Brien. He had no rivals among his peers for the role ofchange agent-in-chief and chief designer of a new philosophy to revitalize thecompany. Adam and O’Brien were both “business junkies” (O’Brien’s phrase),
avid students of other businesses.
Religion has had a strong role in O’Brien’s life. He considers himself “aChristian first; a capitalist second.” He has managed to integrate his religious
faith with his business life—a key to his considerable success. He achieved hisbusiness success, not in spite of his religion, but because of it. His 12 years of
Catholic school education were the source of his values and his passion forvirtue in the workplace and a major source of his whole approach to changing fundamentally the way Hanover was run.
When I asked O’Brien what is inside a person that causes him to lead thatkind of change, he explained:
There are stages of growth. There’s a stage where you want to get established—family, career. Then you get established and you’ve got to cross a line if you
want to go to the highest stages, which are heavily centered around legacy, leaving a better world, becoming more other-centered and less self-centered. I had
achieved a lot more than I ever expected, and I felt that my mission was to set amodel for how work, life, and profitability could be married in a better setting. I
never felt I was a troublemaker. I felt I was always playing within the boundaries, and I could prove that I could meet the business objectives by following
values and my beliefs about the basic worth of the working person.
I was fairly articulate about explaining it. I found bosses here and there who
would back me. I found others I couldn’t stand and I changed jobs. This is why
I’m a little bit passionate when I talk about virtue. Our problems in business andgovernment are not because we’re not smart enough to cope with them. It’s a virtue issue. The old, eternal capital sins—power, greed, lust—they get us in trouble
over and over again. Business has an awful lot of power to make a difference.

O’Brien is not pious about expressing his religious beliefs. He is mostly
plainspoken and, once in a while, profane. I questioned him about the sourcesof his ideas about leadership, “What kind of a fellow were you back when thiswas all beginning? I’m trying to understand how someone comes to take on thechallenge of making change.”
He responded:
I graduated from high school in 1950, and I don’t think I ever met a person in
my social life who wore a shirt and tie, except the family doctor making house

REFLECTIONS, Volume 3, Number 1

Note
1. See, for example, Fyock, C.D. “Retention
Tactics That Work.” Employment Management Today 3 (Winter 1998): 1216, reprinted as a SHRM White Paper.
Reference
Collins, J.C. and J.I. Porras. Built to Last (NewYork: Harper Business, 1994): 48 andentire chapter entitled “More Than
Profits.”

SUGARMAN

values espoused at Hanover are precisely
those that studies reveal bind employees toorganizations. For example, another driverof employee retention is “having a say.” Not
surprisingly, at Hanover, the importance ofpermitting and expecting employees to contribute through honest communication was
realized in the values of openness andlocalness that encouraged decision making
throughout the organization.
I am fortunate to know both Adam andO’Brien. From 1986 until 1993, I worked at
Hanover Insurance. My reason for joining
the company was to experience the environment that Adam and O’Brien had beencreating. I was not disappointed. Employees
were proud to be associated with Hanover
because its leadership trusted them andtreated them as thinking beings who could
make a difference, regardless of level or position. Like other value-based organizations,Hanover was almost religiously obsessive
about its organizational values and initiatives, an obsession that was contagious. We
all gradually came to believe that working at
Hanover was a privilege.
When I meet colleagues from O’Brien’s
Hanover, we invariably talk about the “goodold days” when we worked for an organization that believed in us, that trusted us totake risks, and allowed us to learn andsometimes fail. And we usually bemoan thefact that so few organizations with which
we’ve had contact as employees or consultants excite our spirit. Hanover was aboutfaith in the individual and faith in the larger
community called “organization.” In the end,
Adam and O’Brien created an oasis where
trust in oneself and in colleagues prevailed
in spite of the hierarchy of the traditional
manager-subordinate relationships. And
trust among thousands of human beings inany context is a rare condition indeed.

Twenty Years of Organizational Learning and Ethics at Hanover Insurance

The energy, attention to employees, and optimism of new management? Orfear of “the new broom” and higher standards?
In the property and casualty insurance business, there is considerable delay between a change in the key success factors and a visible result, perhaps
ten years. There is a long “pipeline” between improving the quality of underwriting and the resulting profitability of those policies; similarly, there is a longpipeline between improving the quality of customer service by loss adjusters
and agents and improved customer retention and attraction of new customers—because of the long delays between when policies are written (sold),when the stream of premiums is received, and when payouts are made. So
should we attribute the acceleration in Hanover’s improvement rate in the second decade to the power of improvements made during the second decade or
to the delayed effect of first-decade changes? Or to some combination of these
two and other factors, interacting in dynamic ways over time?

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Twenty Years of Organizational Learning and Ethics at Hanover Insurance

calls. All my friends’ fathers worked for the electric company or the bus company, and they were all people I respected. They were responsible people. So I
always had respect for the person on the front line. I was only one generation
removed from it myself. I knew they weren’t dumbos.
The other life-shaping experience I had was the army. I went in as a private
and came out as a corporal specialist. In those days, the army was very hierarchical, and I got a look at leadership from the followers’ side. We had militaryleaders who were just outstanding, and other guys who were terrible. I realized
what happened to the terrible leaders; the troops screwed ‘em. We had 24 hours
a day to think about how to screw that guy, and he ended up with so many
problems. He could only put a couple of minutes on each one. We outwitted
him every time. The guys who came in and treated us with respect, who told us
the truth, we put out for them. And you could see it in the army because theychange around all the time. Shipped in, shipped out. A company can go frombeing a top performer to a disaster in 90 days. So I got a view of leadership thatmade a lasting impression.

O’Brien had these firm views about leadership and ethics from early on. Thathe ended up in the insurance industry, rather than another one, was fortuitous. “I tried to get a job at IBM, at Mobil Oil, at the telephone company, but
I ended up at SafeCo, an insurance company in the financial district of New
York City,” he commented. “Not because I loved insurance, but because I got
down to the bottom of the food chain. I started as an accounting clerk, then I
got into billing systems, then underwriting, then marketing. The company didbusiness through independent agents, and I wound up having a field of about
40 agents.”

Results and Reactions

16

The 20-year period of sustained, renewed improvement at Hanover wasachieved by unlocking the human potential of Hanover’s employees. At the
beginning, it was the personal vision of just a few people, but became theshared vision of many, supported by social norms and expectations (company
culture). This transformation of a business, as investors or industry analysts
would view it, could not have happened without the corresponding transformation of the people involved, both the rank-and-file employees and the leaders who instigated it. Later, observers called this “culture change,” and Hanover
was featured in The Fifth Discipline as one of the pioneer “learning organizations” (Senge, 1990). But the leaders of this organizational change just wanted
to make a successful business from a rundown insurance company rife with theusual pathologies of bureaucracy, company politics, bad attitudes, and despair.
The leaders abhorred the waste of human talent they saw; it violated their values and ethics, and they believed they saw how to fix both problems at thesame time. It was harder than they thought and they found no guides or models to light the way. But they succeeded, to a remarkable degree.
Hanover’s parent company was State Mutual, a mutual insurance company; its chairmen during the 1970s and most of the 1980s had been strong,
consistent supporters of O’Brien’s philosophy of business. When the last one
died in 1989, his replacement wanted greater control over Hanover and its assets. Hanover, a public stock company, was making 70% of the group profits.
So the parent company chairman added five members to the Hanover board inorder to secure his control. O’Brien opposed this and resigned. “In my heart,”
he says, “I could not convince myself that the new regime was committed tocontinuing support for the values-based culture we had built up over 20 years.”
What happened to Hanover after that becomes controversial. I have notresearched that part of the story, so the remarkable story of a 20-year organizational and personal transformation ends here. The story is about installing
more virtue in the business world, while providing better service to more cus-

Volume 3, Number 1, REFLECTIONSSUGARMAN

Questions for Reflection

O’Brien is a business leader who defined a major part of his role as teacher; I
am a teacher and management researcher. Since we both believe that ideas
become most powerful when people actively engage in them, we conclude thisstory by challenging readers to consider a few questions: Are we inclined to believe that virtue and business are incompatible insome basic way? Why do we believe that? Are they really incompatible?
 “More virtue, with more profits” could be the theme of this case. Is it hard
to believe? Does this claim sound like some hokey, chamber-of-commercegoes-to-Sunday-school fairy tale? Or is it a paradox that deserves some very
serious thought?2
 When virtue and profit considerations can be brought together, do they
then snap together (like a natural fit), or does it take constant work tokeep them together (as if there is a tension between them)? What is thistelling us?
 How can we reframe the question about virtue and business so that theparadox disappears or becomes manageable?
O’Brien responded to the question about virtue and business being incompatible:
I think part of it ties to a lack of appreciation of how important relationships arein business. Virtue builds a relationship. When people trust you and respect theway you do business, they refer customers to you—even if you are a little more
expensive—in any business, not just insurance. Good relationships are formed.
You can do business with them and feel comfortable about it. Your employees
like to work with them. There are fewer complaints. They do things right. It’s
performing and it’s being virtuous. It’s saying “no” to the people who don’t live
up to their obligations, or who lie. Good relationships are formed and they areenormously important to profitability.

Twenty Years of Organizational Learning and Ethics at Hanover Insurance

tomers, a more satisfying work experience to employees, and better returns tostockholders. The story is also about teaching the fundamentals of organizational learning by example.

Notes
1. Material for this case was gathered mainly from about a dozen interviews with Bill
O’Brien that I conducted over almost a year, supplemented by other reading and research. The story of Hanover’s transformation is presented primarily from O’Brien’s
viewpoint, colored by his quite apparent biases. My own biases enter in the way thatthe story is organized, analyzed, and presented. Hanover’s impressive business results are hard, verifiable fact. Hanover is a publicly traded stock company, audited
and regulated, so this information is in the public record. I aim to convey somethingof the spirit and passion that animated the transformational work done by O’Brien,and Adam in the first years, with their many partners throughout, in changing thecompany during two decades.
2. I define a paradox as when we see two ideas that we believe to be incompatible both
appear to be true or necessary. If we can find another way to look at the situation,either the paradox disappears, or it becomes acceptable. An interesting view of someparadoxes faced by Hanover can be found in: Hampden-Turner, C. Charting the Corporate Mind (New York: Free Press, 1990): 59–84.

References
Adam, J., Jr. “Ten Caveats” (Worcester, MA: Hanover Insurance, 1986).
Adam, J., Jr. “Put Profit in its Place.” Harvard Business Review 51 (March–April 1973): 150.
Hanover Insurance Company, Annual Report, 1986.
Senge, P.M. The Fifth Discipline (New York: Currency/Doubleday, 1990).

REFLECTIONS, Volume 3, Number 1

17

FEATURE

How Companies
Build Social Capital
Sandra Waddock

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
William Butler Yeats, “The Second Coming”

Sandra Waddock
Professor of Management
Boston College
Senior Research Fellow
BC Center for Corporate Citizenship18© 2001 by the Society for Organizational Learning and the Massachusetts Institute of Technology.

What can sustain the center in our lives, in organizations, and in societies during the
turbulent, changing times we face as the millennium dawns? People are less connectedin communities in which families are dispersed and corporations and whole societies nolonger offer work or social stability. Such times arguably demand more vision from leaders than when life, inside or outside organizations, has more stability and less flux. Whenshared with others, positive vision, underpinned by positive or constructive values, has
the capacity to generate a necessary sense of community and meaning in work and in life.
Many people in the US seek such meaning in their work lives and places, partly because
it is lacking elsewhere. Sometimes, this search for meaning is called spirituality; sometimes, it is called organizational spirit.
In this article, I argue that awareness or consciousness, which differentiates humans
from other sentient beings, causes them to seek meaning in their lives, work, communities, and societies by developing social capital, that is, a sense of community, of being
in “this” together. People derive meaning, at least in a work situation, from a sharedsense of working for a better world. This common understanding is the essence of constructive visions that inspire people to believe they are contributing to something worthwhile. Further, although people can derive meaning from individual or personal projects,
shared vision is fundamentally a collective outcome (Freeman and Gilbert, 1988). Social
capital has a positive impact on economic productivity and the health of civil society. It
is also an important element for shaping meaningful interactions within businesses andcreating a basis for the contributions that generate meaningful work.
How do companies go about building social capital internally? In part, by creating
an environment in which people can contribute and are acknowledged. In part, by forming an inspiring vision. Timberland is one company that seems to have made progress increating internal social capital. The “getting together and figuring out our problems” that
CEO Jeffrey Swartz talks about draws on the social capital that Timberland has generated
through its community-relations involvement and the collective vision that the “pull on
your boots and make a difference” motto signify (see the Timberland sidebar). This typeof vision is what I call constructive, in that it provides a basis for developing shared meaning among participants in an enterprise like Timberland. Such visions not only provide abasis for generating a common good—something good that we do in common—but also
help companies develop a culture that builds internal trust and links both internally withother employees and externally with important stakeholders like communities, suppliers,

Volume 3, Number 1, REFLECTIONS

Human history is the experience of individuals confronting the world around them.
Timberland participates in this process, not just through our products or though ourbrand, but through our belief that each individual can and must make a difference inthe way we experience life on this planet. As a team of diverse people motivated andstrengthened by this belief, we can and will deliver world-class products and services
to our customers and create value for shareholders around the world.
The Timberland boot stands for much more than the finest waterproof leather. It
represents our call to action. Pull on your boots and make a difference. With your bootsand your beliefs, you will be able to interact responsibly and comfortably within thenatural and social environments that all human beings share.

WADDOCKWith its motto, the Timberland Company, a New Hampshire-based manufacturer of hiking boots,
sets a high standard for companies attempting to articulate and live up to their values. The familyrun company has revenues of nearly $1 billion and a brand that sometimes has been considered“magic.” Part of that magic resides in the values-based relationships that the company has developed with its core stakeholders: employees, customers, distributors, and retailers.
Jeffrey Swartz, CEO and president of Timberland, acknowledges the critical role of thecompany’s values in promoting its brand and identity as a producer of top-quality, rugged, outdoor footwear and also as a company that gives back to its communities. Core beliefs at Timberland revolve around everyone’s capacity to make a difference in the world and are articulated on
the company’s website (http://timberland.com):

How Companies Build Social Capital“Pull on Your Boots and Make a Difference” at Timberland

For Swartz, success in this business means developing relationships with customers and with thelocal entrepreneurs who run Timberland local retail outlets, which the company calls community
stores. The effects of a successful store in otherwise underserved areas ripple through the community and employees’ lives. For example, the company recently opened a store in Washington, DC,
where, as Swartz points out:[T]he environment . . . is underserved from a retail perspective, so it’s a good business
opportunity. It’s also a good community opportunity because we hire locally, and partof the proceeds from the store are turned into scholarships for young people from theneighborhood where the store is located. It’s good for the community in that sense. It’s
also good for the shareholder because we are serving the consumers otherwise notserved with proper respect. We develop a terrific relationship with a local entrepreneur
who’s got a community/wealth/profit motivation. . . . It’s good for the consumer, andthe shareholder, and the employee. That’s community wealth. It’s not about charity; it’s
about social wealth. That’s a different concept (Leand, 2000).
The integration of the needs of multiple stakeholders creates the kind of business culture and environment that Swartz and other employees at Timberland value. The company lives out its philosophy
in numerous other ways as well, for example, by being the founding sponsor of the City Year Programwith a $1 million investment. City Year allows people to devote a full year to community service in
one of ten cities across the US and sponsors one-day “serv-a-thons.” Timberland also supports othercommunity-based activities, such as Share Our Strength, a program aimed at alleviating world poverty and hunger; AmeriCorps, which provides thousands of service opportunities annually; and City
Cares of America programs, in which professionals are encouraged to volunteer their services.
Timberland’s involvement in service and environmental activities, its encouragement of its employees to become involved, and its many commitments are a part of doing business well and building thetype of company culture that will attract the talented employees needed for future growth. Swartz
believes that the company’s turnaround from a 1995 liquidity crisis was due largely to the company’s
internal community: “We got together and figured out how to deal with our problems” (Swartz, 2000).
Swartz comments:
Our greatest strength is that we have seen the potential to be a great and genuine community of caring, committed, passionate, professional people. If we perform at our highest level as a community, then we will make Mountain Athletics [a new venture] a better
brand and we will make Timberland Pro a better brand and service our retailers better
and we will have better results for our shareholders on a more consistent basis. We havegoals, we have high purpose, and we have really talented people, and every once in awhile, because we are deeply committed to this connection, we have these moments
where we really are a community. We speak honestly. We take risks. We transcend ourlimitations. We aren’t employees, we are passionately committed to the same high purpose. And I think in those moments is our greatness (Leand, 2000: 37).
—Sandra Waddock
References
Leand, J. “Jeffrey Swartz, President & CEO, The Timberland Co., The SGB Interview,” Sporting Goods
Business 33 (August 4, 2000): 34–37.
Swartz, J. Speech (Chestnut Hill, MA: Boston College, October 26, 2000).

REFLECTIONS, Volume 3, Number 1

19

WADDOCK

Cisco Systems’ Vision Yields Social Capital and Meaning

How Companies Build Social Capital

Called an “unabashed evangelist for radical changes in management,” Cisco Systems CEO John T.
Chambers has put his vision for a new, progressive business model—one that makes consistent links
with a variety of stakeholders—into practice (Byrne, 2000). At Cisco, personal and organizational vision are unified, the meaning of the company’s work is shared, and the company works hard to develop relationships with its multiple stakeholders that provide for both credibility and a basis forbuilding social capital internally and externally.
According to Cisco’s website:

Steven J. Waddell
Director
The Collaboration Works

Cisco’s vision is that the Internet will transform the way people work, live, play, and learn.
Today change is happening faster than ever before, and Cisco helps companies turn thatchange into a competitive advantage, by helping them become agile. How? With expertise,a strong network of partners, and superior technology including intelligent network services and scalable architectures. Cisco is the worldwide leader in networking for theInternet (Cisco, 2001).
Cisco’s unique strategy is built on establishing excellent—and online—relationships with its primary
stakeholders. It has built an internal network structure that allows its stakeholders instant access to its
resources. For customers, Cisco has the Internetworking Product Centre (IPC), so they can order online
and get technical support, speeding processing of orders and deliveries. Potential customers can log
onto the Cisco Connection Online (CCO) for detailed corporate information, products, and services. Suppliers are networked through the Cisco Supplier Connection (CSC), which offers direct access to Cisco’s
materials resource planning system and enables suppliers to monitor orders and ship automatically.
Partners are linked through the Partner-Initiated Customer Access (PICA), which provides resources forsales initiatives; employees are connected via the Cisco’s Employee Connection (CEC), an intranet intended to improve productivity (Eizengerg et al., 2001).
But it isn’t just size or an 80% market share that makes Cisco a visionary company. Chambers is clear
about the type of organization his vision implies:
The reason people stay at a company is that it’s a great place to work. It’s like playing on a great
sports team. Really good players want to be around other really good players. Secondly, people
like to work for good leadership. So creating a culture of leaders that people like is key. And thethird is, are you working for a higher purpose than an IPO or a paycheck? Our higher purpose is
to change the way the world works, lives, and plays (Byrne, 2000).

20

To live up to these standards, Cisco applies its corporate citizenship very broadly to its customer and ally relationships, and has also implemented a number of strategically important community- and education-oriented
programs. For example, Cisco deploys employee volunteers in local communities into many projects with corporate support. More important to its mission as a network services provider, the company has established the
Cisco Community and Educational Technical Advocates (CETA) program, which integrates technical expertiseand assistance into Cisco technology grants given to educational institutions.
Cisco has also established a program that will ensure a trained base of technicians in the future,
while providing much needed help to many school systems—the Networking Academy program. Simultaneously, the academies develop external and internal social capital because they link Cisco’s vision,values, and corporate citizenship to the external communities in which the company operates. The
academies teach high school and college students how to design, build, and maintain computer networks, with a curriculum that ranges from basic networking skills to advanced troubleshooting tools.

and customers. Ultimately, such relationships result in social capital that acts as a sourceof organizational glue when times get tough, as they did in 1995 at Timberland.
Shared visions such as Timberland’s become meaningful, however, only when they
are positive and inspirational and when they allow people to see how their roles in theenterprise contribute, particularly to a common good. Vision creates aspirations; it enhances the pursuit of a larger purpose, something outside of and bigger than one’s own
purpose, generating a sense of “we” rather than “us vs. them” (Senge, 1990). In thissense of “we,” social capital is found. And, increasingly, companies like Timberland arerecognizing that the trusting relationships with key stakeholders that evolve from enhancing social capital are keys to competitive success.
Companies without social capital risk their stakeholder relationships. For example,
without relationships built on trust, companies can face erosion of employee loyalty (aproblem during employee shortages). They can experience negative responses from local communities that provide the necessary infrastructure. They can alienate their cus-

Volume 3, Number 1, REFLECTIONSWADDOCKHow Companies Build Social Capital

Making connections between a global organization and a local community in the developing worldis challenging. In Cisco’s case, these connections also involve crossing developed and developing
country divides, income disparities, and cultural differences. After only three years of operation,
Cisco’s global academy network successfully connects 5,000 institutions in 84 countries and trains
more than 129,000 students.
The Networking Academy has developed a global “education ecosystem” to keep pace with therapid evolution of information technology. The word “ecosystem” emphasizes the holistic and selfsustaining quality of the academy that Cisco considers essential. The global system was quickly built
through a simple strategy: find local institutions that can be partners wherever Cisco operates. These
partners are mainly public and private education institutions, but also include business, government,
and community organizations.
How do Cisco’s academies work with respect to developing social—and other forms of capital—
within communities? “We’ve got a problem of high unemployment,” says the chairperson of South
Africa’s Houwteq Institute. “We saw an opportunity, and the Internet is the future.” Houwteq is apost-secondary institution with students from traditionally black universities. With the need for employment, the demand for employees trained in networking technologies, and the problems of disadvantaged youth, the Networking Academy appears to be a win-win-win proposition. Program
graduates obtain a globally recognized and sought-after certificate, Cisco has a source of trained employees in South Africa, and the country’s technically trained labor pool has expanded.
Cisco has invested nearly $100 million in curriculum and software development, training, assessment,
equipment donations, translations, and 200 to 300 staff people. The staff builds networks, develops curricula, and constructs the online teaching resource that is the backbone of the system. (For information,see: www.cisco.com/warp/public/779/edu/academy/) “Just over the last year, it has improved tremendously,” says Nothemba Sonkwele, a teacher at Houwteq. “We now have really good simulations. [Theprogram] is very well structured, the curriculum assumes no prior knowledge, and anyone can do it.”
Another of Cisco’s aims is to partner with organizations that are interested in working with traditionally disadvantaged people. This was a core reason for working with the International Youth Foundation and the World Bank’s Business Partners for Development to nurture academies in four
countries, with the thought that the networks would allow more adventuresome and creative delivery
strategies to poor communities than mainstream education institutions provide. Academies havebeen established in homeless shelters, prisons, and women’s housing projects, and community centers.
In the Philippines, for example, the Ayala-Mitsubishi team’s school had 127 students in its first year,
115 of them women, with an average household income of $650 per year. In South Africa, this focus
was one reason that Houwteq, which focuses on recruiting students from traditionally black colleges,
was the first local academy chosen; almost all the students have been women.—Steven J. Waddell
and Sandra Waddock

References
Byrne, J. A. “Visionary vs. Visionary,” in “The 21st Century Corporation.” Business Week (August 21/28,
2000): 210 ff.
Cisco. (http://www.cisco.com/warp/public/779/largeent/why_cisco/vision.html) Various parts of the Cisco
website were sources for this case.
Eizengerg, M.I., D.M. Gallo, I. Hagenbuch, and A.N. Hoffman, “Cisco Systems, Inc.,” in Strategic Management: Competitiveness and Globalization, fourth edition, eds. M.A. Hitt, R.D. Ireland, and R.E.
Hoskisson (Belmont, CA: West/Wadsworth, 2001).

tomers with policies that seem to disrespect their real needs or foist poor quality products on them that are produced by sweatshop suppliers.
As the message about their relationships with particular stakeholders can spread
globally at the click of a mouse, companies need to be increasingly sensitive to the meanings that stakeholders take from their actions. A wide range of observers, not all of themfriendly, increasingly scrutinize those actions. Companies, recognizing that intense scrutiny, must work hard to engage interactively with their stakeholders in order to build
social capital, as the Cisco Systems case illustrates (see the Cisco sidebar). Such interaction moves a company’s social capital beyond internal boundaries and shares the vision
broadly, helping to build community with other stakeholders.
A company widely known by the unglamorous label of “the plumber of the Internet,”
Cisco Systems builds social capital by focusing on its stakeholder relationships. The systems that Cisco has evolved to communicate with its stakeholders provide the basis fordeveloping ongoing, trusting relationships. The two-pronged strategy of helping commu-

REFLECTIONS, Volume 3, Number 1

21

WADDOCKHow Companies Build Social Capital

nities enhance their educational systems through Networking Academies while simultaneously building its own future workforce enables Cisco to do well and do good.
Notably, both Cisco and Timberland emphasize organizational values that go beyond the common notion of maximizing shareholder wealth. Timberland’s values of“making a difference” and Cisco’s “higher purpose” of changing the way we live, work,and play to include the connectivity of the Internet help stakeholders and employees see
how their organization sees itself. In addition, visions underpinned by constructive values give many stakeholders a way to learn how their own efforts contribute to the goodof the whole. As long as companies continue to sustain the trust that these vision andvalue combinations imply, they continue to build social capital with their stakeholders.
Numerous studies of civil society have shown that social capital contributes to societal health; its lack appears to contribute to the dis-ease that many people sense about
their communities. Social capital also plays a role in successful economies, as businessstrategist Michael Porter demonstrates (Porter, 1998; Putnam, 1996). And I argue that thesocial capital companies develop with their internal and external stakeholders also plays
an important, yet frequently unrecognized, role in their competitive success.

Building a Center22© Emily Sper

The potential of social capital and constructive vision to benefit corporate enterprise goesagainst the grain of current reality in modern organizations. For example, the disconnection inherent in turbulence, visions of maximizing shareholder wealth, and eroded loyalties that require each individual to become an entrepreneur may mean that social capitaland a constructive vision are increasingly hard to achieve. Vision implies that we know
where we are going and what we need to do to get there. Typically, what we need to do iscollective and requires some degree of stability and loyalty to develop. Vision provides
direction and focus and, when constructive, inspires commitment, engagement, reciprocity, and a sense of community—social capital. The current mantra seems to be “watch
out for yourself and never mind others or even the consequences of what you do, as longas you profit.” But, as the Cisco Systems case illustrates, there is no reason why profits
and the meaning generated by shared vision cannot coexist.
Meaning and vision are intangible, as is social capital.
They cannot be measured quantitatively. And because
most corporate culture, and Western culture generally, relies on the readily measurable and observable, these intangibles are typically given short shrift. Organizational
spirit, based on coherent values and a constructive vision,
may be just the glue needed to hold the center and provide
meaning in work and, ultimately, result in better productivity.
If, as I have argued above, spirit—and success—derive from the social capital of connectedness and a visionthat unites, then drawing the lines of connection among
and between stakeholders may be a key to creating meaningful enterprises. Primary stakeholders constitute the organization; these stakeholders are the employees,
suppliers, allies, owners, and customers on whom thecompany depends for its existence. Social capital in acompany is built on the trust and reciprocity inherent in internal and external relationships. Corporate practices have an impact on stakeholders and can build or destroy social capital and meaning, depending on how they are implemented. Such practices
encompass not only the corporate vision and mission but also the ways in which relationships with employees, customers, suppliers, owners, and local communities and governments develop and are managed.
Employees form the essential core of any organization. Without them, no work,
meaningful or otherwise, gets done. If we think social capital and vision are important,then employees and other contributors need to know their places within the hologramthat constitutes the organization (Senge, 1990). They need to know how their work af-

Volume 3, Number 1, REFLECTIONSCommunities are built on trust andreciprocity, care, and mutuality ofendeavor, not on disloyalty,
fragmentation of purpose, andselfishness.

 Center the organization by creating a constructive vision with associated values that
demonstrates how it contributes to a better world, and then regularly and carefullycommunicate those values to relevant stakeholders.
 Create corporate practices that treat key stakeholders with dignity and respect; thatis, live up to the articulated vision and values. Think about the consequences of adecision and whoever will be affected. If disrespect is implied, rethink the decision.
 Create feedback loops—communicate the organizational holograph—to stakeholders, showing their contribution to the vision and ensuring that their work is appreciated (Senge, 1990).
 Develop social capital by allowing time for reflection about work done together, theimpact of that work on other stakeholders, and how to improve it. Creating or fostering multiple communities of practice centered on common issues, topics, andspecific practices achieves a vision that enhances internal social capital (Wenger,
1998; Snyder, 1997).
The humanization that comes from positive social capital occurs because links within acommunity create a network of reciprocal relationships and mutual obligations amongindividual members. It brings us closer to recognizing that we live in a society, as former
Secretary of Labor Robert Reich has stated, not simply in an economy. It allows space inbusy work lives for the “soft stuff” that ultimately matters: community, aesthetics, nature, spirit, care, respect, and meaning.
Community members also exchange information, which helps them build a shared
identity and common values. In turn, these values generate norms of behavior and appropriate practices that provide sanctions where appropriate and rewards where feasible(Penner, 1997). Social capital thus builds meaning and spirit. It can create a center thatperhaps can hold, prevent anarchy from being “loosed upon the world,” and ensure thatthe “best” people, companies, communities, and societies maintain their conviction,
along with passionate intensity, to fulfill the common purpose of building a better world.

REFLECTIONS, Volume 3, Number 1

WADDOCKHow Companies Build Social Capital

fects the other stakeholders on whom the company relies. They need to know how theirwork contributes to achieving the organizational goals that effect the building of a better world. Simply stated, they need to know what the constructive vision is and how tohelp achieve it.
Management can enhance the corporate vision by carefully articulating it and illustrating its constructive aspects, that is, how it contributes to the better world that I believe most people want to build. That, however, is not enough if we believe that social
capital is also important to long-term success. Social capital is built, in essence, on community. Communities are built on trust and reciprocity, care, and mutuality of endeavor,
not on disloyalty, fragmentation of purpose, and selfishness. Creating this spirit may require not speeding up or fragmenting into ever smaller,
disconnected entrepreneurial units, but rather slowing
down and paying attention to the whole (or holon [Wilber,
1996; 1998]) that the enterprise represents within its
broader society. Slowing down allows reflection, community, and meaning to emerge, and helps create connections
among vision, values, and the way that value is added.
Building trust and reciprocity may require taking along-term perspective that we are all in this together, that
we can make a joint contribution to better the world, that
we have a common project that matters. That perspective
requires thinking through the consequences of practices or wisdom, as Russell Ackoff
has noted (Ackoff, 1999), and mindfulness. To build trust and reciprocity—communityand social capital—with stakeholders, both leaders’ and their companies’ goals need to
be worthy of trust. There can be no gap between the rhetoric of valuing employees, customers, or suppliers and the ways in which operating practices are enacted daily andexperienced by stakeholders. Leaders can shift company practices, sometimes subtly,
toward generating meaning, social capital, and vision by thinking more carefully aboutcompany practices and their impact on stakeholders, as the examples of Cisco and Timberland show. For example:

23

WADDOCK

References

How Companies Build Social Capital

Ackoff, R.L. “On Learning and the Systems That Facilitate It.” Reflections 1 (1999): 14–24.
Freeman, R.E. and D.R. Gilbert, Jr. Corporate Strategy and the Search for Ethics (Englewood Cliffs,
NJ: Prentice Hall, 1988).
Penner, K. “The Ties That Lead to Prosperity.” Business Week (December 15, 1997): 153–155.
Porter, M.E. “Clusters and the New Economics of Competition.” Harvard Business Review 76 (November–December 1998): 77–90.
Putnam, R.D. “The Strange Disappearance of Civic America.” The American Prospect 24 (Winter1996): 65–78.
Senge, P. The Fifth Discipline (New York: Doubleday/Currency, 1990).
Snyder, W.M. “Communities of Practice: Combining Organization Learning and Strategy Insights toCreate a Bridge to the Twenty-First Century” (Cambridge, MA: Working Paper, Social CapitalGroup, 1997).
Wenger, E. Communities of Practice, Learning, Meaning, and Identity (New York: Cambridge University Press, 1998).
Wilber, K. A Brief History of Everything (Boston: Shambala Publications, 1996).
Wilber, K. The Marriage of Sense and Soul: Integrating Science and Reason (New York: Random
House, 1998).

Acknowledgments
This article is based in part on the author’s book, Leading Corporate Citizens: Vision,
Values, Value-Added (McGraw-Hill/Irwin, 2001). With thanks to Steven J. Waddell for
permission to adapt his Cisco Systems case.

Commentary
by James E. Post

24

James E. Post
Professor of Management
Boston University

Sandra Waddock makes a convincing argument for rethinking the modern corporation as a vehicle forcreating wealth and advancing society. We live in an era when intense pressures force corporate leaders
to focus more narrowly (and “mindlessly” in her terms) on financial performance and shareholder wealth.
It is increasingly difficult to identify companies that value their social capital, build trusting relationships with all of their stakeholders, and demonstrate the mindful approach Waddock urges. Still,there are examples worth noting. Timberland and Cisco are cited as examples deserving careful study.
Each surely has its critics, but their long-term social performance is more than public relations spin.
Wall Street pundits have pointed to the demise of hundreds of dot.com companies as further
proof that humanistic commitments are incompatible with financial success and that firms thatprize the “soft stuff” are doomed to financial failure. I think such views totally miss the mark.
The large, un-centered corporation, whose executives can only discuss their company’s successin terms of share of market, ROI, ROE, and share price, is a dinosaur. Who wants to work for suchan organization? Employment is instrumental; long-term commitments are disdained; the old social contract is a drag on the corporate future.
But a company that is not doing interesting work, with benefits that accrue to society and all its
stakeholders, will find it difficult to persuade employees, customers, and communities that it isworth their time, effort, and energy—their “lifeblood.” Turnover rates rise, morale declines, and thedisease spreads throughout the body. It becomes the leukemic corporation.
Social trust and social capital are the “ties that bind” people to organizations in a voluntary andproductive way. Corrosion weakens these ties. They may not break at first, but over time, there is no
logical reason to think that they can survive the long-term effect of social rust.
What is often lost on executives, operating under pressure of the shareholder wealth argument,is that employees need not “exit” an organization to display their dismay. People “check in” to anorganization for utilitarian reasons—jobs, careers, products. But people also “check up” on theorganization’s values every day. When the social rust exceeds the social trust, people will begin to“check out,” in mind, spirit, or body. Nothing undermines an enterprise more quickly or surely thanthe loss of faith in its purpose, or its leaders.

Volume 3, Number 1, REFLECTIONSApplying Systems Thinking
in a Small Knowledge-based
Company

FEATURETim Hickey

Managers who recognize that each organization is a system interconnected like themany threads of a web can encourage that system toward healthy growth. Whilemost managers are familiar with various management concepts and tools, too often they
deal with each separately. Systems thinking provides a practical way to consider the interrelationships of a business and the whole range of management tools. In order to borrow effectively from multiple management concepts, you should view each as one thread
to weave an ever-stronger web within your company. Envision all the effects throughout
the system. All the tools—chaos theory, organizational learning, continuous improvement, total quality management (TQM), cross-functional teams, and others—arestrengthened if you see how they fit within one consistent approach.
As systems thinkers already know, stories provide an easy way to learn. The following story of my first year and a half as the president of a small company illustrates myactions to drive growth while thinking of the company as a system. (I am no longer affiliated with the company and have not revealed its name.) My story discusses many of
the threads, or tools, found within the developing web of a rapidly growing business.
My systems view has evolved from various experiences. My attention to the systems
behind organizations has led me to experiment with system improvement. As my understanding has grown, I have come to see that “systems to improve systems” are a powerful
way to improve work flows. I learned a great deal about the work of Shingeo Shingo, thecreator of the Toyota Production System, when I was director of international sales for Productivity Press, Shingo’s American publisher. Shingo saw and addressed interconnections,more than “events” (Shingo, 1989). I have also studied TQM and other systemic methods ofimprovement like Implementing a Lean Management System (Jackson, 1996). I have attended Pegasus’s systems thinking conferences and read articles and books on systems thinking such as Learning Organizations (Chawla and Renesch, 1995). Of course, using theseideas in the workplace has given me a deeper understanding based on experience. And a 12year study of meditation has also shown me that, indeed, everything is connected.
“Fixes” that do not recognize and consider interrelationships are not likely to be effective or lasting. But even fixes that do consider the unintended consequences still will
not be permanent. Because systems are in continual flux, improvement also must be continual. Stimulating the creative energy of the individuals and organization is the best hopefor sustained healthy growth. My biggest job was to mobilize people; their creativity could
be applied to creating quality for the company’s customers and environment. The company also needed to present an honest, clear, and consistent image in the marketplace.

Tim Hickey
Vice President of ProductManagement and Marketing
Columbia Ultimate

25

The Company’s BackgroundThe small company in my story provides translation and localization services for large organizations doing business internationally. Localization is the preparation of websites,
software, or other products for a particular locale. It includes and goes beyond translation
REFLECTIONS, Volume 3, Number 1© 2001 by the Society for Organizational Learning and the Massachusetts Institute of Technology.

HICKEY
Applying Systems Thinking in a Small Knowledge-based Companyof text from one language to another: it also addresses cultural issues, formatting differences (such as dates, times, currency), usage or layout differences (such as reading rightto left), and many other topics. A localized website should feel as if it were created in theuser’s country and language. The company works on various software languages, platforms, and operating systems, localized into many languages. It has a core staff and hundreds of global contractors.
For the first time in the company’s five-year history, the owners were unsatisfied
with the management of service and quality. The company had always done top-quality
work and made a profit. In 1996, everyone in the company worked very hard, but results were poor. The company did get some new business, after relying too heavily on
one customer for years, but didn’t satisfy the new clients or convert them into customers. The owners decided that they needed to reconsider their executive committee modeland hired a consultant who provided some sound advice in some areas and other “notso sound” advice. He advised that the company needed a president who would have theauthority to run the company, so the owners hired me (I like to think this was a gooddecision). Previously, they had hired general managers who did not have authority;
rather, the executive committee ran the company. For a while, this had been sufficient,
allowing the company to grow until it reached a critical management juncture. However,management by committee is nearly always unsuccessful.
The consultant also suggested that the company not localize software, but onlytranslate documentation. This decision was based on reasoning that the company had
had trouble managing itself and needed to scale back. Unfortunately, those problems
were not in the area of software localization, so this was a very poor decision. Software
localization offers much potential in this industry, and many customers needed to have
localized documentation and software. To offer only half of what many customers required precluded the company from working in a vast portion of the market.
The consultant advised that some people be laid off; others decided to leave. Those
who remained were insecure and uncertain about their futures. The restructuring shook
the trust of remaining employees: they were convinced that the owners were “bad guys.”
Pay levels were frozen. Morale could not have been worse. On top of all that, the company was at risk with its biggest customer. The challenge I faced as the new president
was to improve most areas of the company dramatically and, at the same time, provide
a sense of stability to the workforce.

Integrating Thought, Communication, and Action

26

The company desperately needed thought, communication, and action. A change in one
area of the company would have consequences, intended and not, in many other areas.
To bring about the needed change, I had to anticipate as many consequences as I could.
I avoided the urge to micromanage to ensure that the changes were driven by the employees, with clear direction from management.
Open communication is itself a stabilizing influence. Even when conveying a message of change, good communication builds understanding and connections. Understanding and being a part of change make it more manageable, perhaps even exciting.
Action, however, cannot wait until everyone agrees. I had
to move quickly and make many large and small changes.
The small ones were clear messages and stimulators, andthe large ones engaged the staff people.
The integration of people and efforts was the key to
growth. I highlighted the connections among employees
and our customers. I repeatedly said, “All we have to do iseverything right.” I knew that fixing only one issue would
be insufficient. I hoped that the company could continue to face new problems, because
to continue to face the old ones would mean failure.
Too much control and structure does not work in a knowledge-based service company. Stimulating energy while providing direction and feedback is the most appropriate way to encourage healthy growth. Lasting change cannot be mandated. But I could

Even when conveying a message ofchange, good communication builds
understanding and connections.

Volume 3, Number 1, REFLECTIONSHICKEY
Applying Systems Thinking in a Small Knowledge-based Company 

not control all the results. For example, encouraging
people’s involvement in change by definition precludes
knowing the outcomes. I could present the new organization to the marketplace, but I could not control themarket’s rate of response. The best I could do was continually ask, listen, and act thoughtfully.
If the whole is not working well, it is the leader’s job
to stimulate and allow the organization to develop. Many
managers are terrified by chaos, but this company had
tried control and found that it did not work. I saw chaos—an open-ended, multiheaded search for equilibrium—as astage of growth the business needed to go through in order to reorganize itself. In addition to the uncertainty introduced by the action plan, the staffers who had worked
at the company before me were not only uncertain, buthighly suspicious. While I created budget projections andacted in many areas, I also faced uncertainty. I stimulated
growth and trusted in the company’s developmental
progress, believing that if I made clear the overall direction
and stimulated the thoughts and actions of the community, the company could grow through the uncertainty.

Customer Focus
My goal of building a company that focused on the customer
guided us through this period of change. I immediately had tomake this new focus the driving force behind the work. I started talking about the meaning
and importance of focusing on all customers. Until then, the company had devoted itself to
one major client. It had erred, however, in applying the specific needs of one customer to all
customers, thereby being internally driven (product-out) rather than being customer-focused(market-in). We quickly made an on-going effort to understand what each customer needed
and to meet those needs.
During my first week, I introduced a monthly “customer delight award,” a $35 restaurant certificate given to an employee. Anyone in the company could nominate a colleague for the award, based on something he or she had done to delight a customer. This
made a clear statement that customers really are important. People also recognized thecontributions of their colleagues and saw that they could make a difference. The award
gave employees a way to acknowledge each other, gave the company a way to recognize
staff, and showed we were interested in having some fun.
In a small company, a limited number of key issues must be identified and consistently tracked to make metrics manageable and useful. To determine which metrics totrack, I began by surveying customers to find out what they cared about most. As a result, two measurable performance metrics emerged: on-time delivery and satisfaction
with projects. The company averaged about 95% on each. By continuing to listen to
customers, I found that we needed to increase, rather than eliminate, software localization. We reversed the earlier decision and rebuilt the localization department.

Building Community and Communication
In an effort to build community and communicate clearly, I held companywide staff meetings every Monday morning at which news and information was shared freely. The firstfew meetings, soon after I joined the company, were grim affairs. No one was willing to
speak. People would not laugh or enjoy themselves. Quite quickly, after unflagging efforts
to engage people in company activities and continuously respectful interactions, the meetings evolved into true information exchanges. The atmosphere became light and filledwith camaraderie. Employees exchanged lots of “hard” and “soft” information, including
personal information. It was essential to give staffers an opportunity to discuss issues with

REFLECTIONS, Volume 3, Number 1© Emily Sper

27

HICKEY
Applying Systems Thinking in a Small Knowledge-based Company

each other outside of deadline-driven projects. With a little time to talk about what theyeach needed to do a good job, they could understand each others’ needs. When that happened, they were willing to support their colleagues who were also supporting them.
At company meetings, we shared some “communication tips” about cultural differences, use of language, listening skills, and so on. Someone, for example, read a humorous but useful list of ways in which people could avoid listening—like “the rehearser” whois always thinking about what he will say next instead of listening. People liked it so muchthey requested printed copies. By fostering a culture of communication, I engaged people,
enlisted their much-needed contributions to working together, and built the business.
I also achieved some progress by hiring people to fill key slots. To improve morale
further, I gave each new hire the specific mission of helping the people who had been at
the company through some hard times to “get over” the past. Some people responded tochange by resisting, by letting it happen, by giving passive support, or helping to make it
happen. I fostered the people who wanted to make it happen and the passive supporters.
Building community and communication was challenging because the company had
a multicultural group of employees. Our global contractors were people living and working all over the world. Our inhouse staff included people from France, Germany, Holland,
Guatemala, Japan, Hong Kong, Ukraine, Russia, and Iceland. Even the US staff represented
diverse locations from Portland, Oregon, to Boston, as well as people who had lived in
France, Ecuador, Russia, and other places. Staff people became more aware of the challenges so their attention and communication skills increased in proportion to the problem.
The one thing that we all had in common was that we were all different.
Providing recognition and motivation can build both individual effort and a senseof community. Even though money was tight, I removed the pay freeze. People started
getting overdue reviews and raises. By not giving raises, the message had been sent thatthe company was in trouble, something that can rapidly become a self-fulfilling prophecy. I was willing to trust our people. The “customer delight award” provided recognition for people’s efforts as well. We also printed up business cards for everyone,
regardless of position, to make people’s importance obvious.

Continuous Process Improvement

28

The processes to complete customer projects were complex. To progress rapidly and improve employee moral, I felt it essential to involve all the staff in the required improvements. While there had been some systems in place when the company had just a few
people, they did not scale up to the demands of the current work force. Motivating staff
to take ownership of their work, which I accomplished by releasing some control to theemployee-driven improvement processes, addressed the frustration the company owners
felt over the lack of commitment toward quality, on-time delivery, and costs. By giving
employees ownership of their work, I steered away from the old model of trying to predict and control all outcomes, which feeds the loop of anxiety, fear, and hostility. The newmodel directly engaged employees in improving the processes and the company. I statedfirmly that I would not sit in the corner office and try to determine what everyone elseshould do and how to do it. The people doing the work
were the people who knew best what needed to be done.
I kicked off a “process and quality improvement initiative.” As we did not have time to waste at poorly organized meetings that did not achieve stated goals, I called
in a professional facilitator, Sara Grigsby of Healthy Systems, to keep the meetings on track. The first facilitatedmeeting, called the “Process, Quality, and Pizza Meeting,”
included everyone in the company (note the trend; work
can be fun). What we tried to accomplish in this all-day session was aggressive, but thecompany needed to improve quickly. The meeting not only began the improvement process, but gave people a practice field for participating in effective meetings.
We initially limited the focus of the process improvement to clients’ projects. In that firstmeeting, we introduced the model and facilitated meeting management. We quickly reviewed
all existing procedures, and many saw for the first time the useful tools we already had.

By giving employees ownership of
their work, I steered away from theold model of trying to predict andcontrol all outcomes.

Volume 3, Number 1, REFLECTIONSHICKEY
Applying Systems Thinking in a Small Knowledge-based Company We agreed on our goals for working on client projects. Together, we identified 44
problems, ranging from “quoting tools are nebulous,” “tunnel vision: people don’t havethe big picture of how pieces fit together,” “formatting of files is wrong,” “lack of positive attitude that problems can be solved,” to “we keep making the same mistakes over
and over.” With this list of issues, we could focus on solutions.
The company needed an environment in which people would continually seek improvement in work processes. Some people could not grasp the concept of continuous
improvement, but asked, “When will we be done? What is the deadline?” They were
uncomfortable. However, the vehicle for working on the issues was in front of them, andtheir efforts were soon funneled into solving the problems.

Effective Teams

REFLECTIONS, Volume 3, Number 1

29© Emily Sper

The opportunity to have an impact on how the company operated came when employees
participated in cross-functional teams. The teams helped people understand their importance and the role of others, and made their work more fulfilling. People could see thechanges and felt good about participating. I created each cross-functional team to focus
on one part of the process. At a companywide meeting, I assigned problems to the teams.
Later, I reviewed and revised these assignments so that most problems were given to only
one team, while some issues, which affected everyone, were given to several teams.
Early on, almost everyone had to be on two teams because the company had so few
people. I assigned a team facilitator to each team, who was also a participating teammember. I gave some initial training to all the facilitators and personally led at least thefirst meeting of each team. Before long, every person was being professionally trainedin how to participate in effective meetings.
While I assigned some problems to teams, they identified others themselves. They
made recommendations, which the management team then reviewed for approval. They
sent the suggestions back for more work or accepted, rejected, or forwarded them toanother team for input in a classic plan, do, check, act cycle. An overview of the entire
process kept the teams moving in the right direction and avoided duplicated effort. The
outcome—the clarification of processes and the forms to support them—was printed andalso issued electronically in a “quality through process” manual. This living document
undergoes continual revision as teams identify process improvements.
As time went on, subcommittees emerged and subsided. New teams formed, and,as the staff grew, most people were on only one team. I promoted an environment for
self-organization and stimulated the energetic flow within a workable realm, allowing
structures and patterns to evolve. Sometimes, people were upset about their lack of input. For example, the operations manager was unhappy that a new subcommittee had
been set up without her knowledge, although she actually learned about it within a few
hours of its establishment. The level of communication had improved so much that she
was unhappy when it took two hours to learn about something!
As the company emerged from the chaos of the initialquality improvements, I quickly began to see results. In justfour months, the teams had created the “quality through process” manual, a major effort and a considerable success. Just
being a part of the effort had an impact on most employees’
work. Even before the processes were clarified, people saw
what was important. Communication and quality improved
quickly and dramatically.
Successes and positive comments from vendors andcustomers were posted on the bulletin board and read atcompanywide meetings. Later, we added monthly awards
for teams and contractors. It’s nice to win a prize, but being acknowledged by coworkers is probably more important. And probably the most meaningful reward for people
was to be part of a vibrant event, so they could feel an active and important part of something dynamic and growing.

HICKEY
Applying Systems Thinking in a Small Knowledge-based Company

Systems Marketing
The underlying thought behind the integrated direct marketing program was that the company needed to send a consistent message in all its marketing efforts. This would be successful over the long run only if marketing efforts projected what the company really was.
It took some time to identify, but I settled on some basics quickly. One was to present thecompany as “approachable experts.” We established a unique selling proposition, identified a range of colors and type styles for marketing and advertising, and created images
that suggested quality and international business. We systematically put the company infront of the marketplace with a consistent look and message. We backed up the marketing message in operations.
It was also clear that customers needed help in learning how to properly manage thelocalization of their materials for global use. Understanding this helped us understandthem and ourselves. I asked several employees to help create a booklet to educate customers. The intent was not to tout our prowess, but to assist customers and prospects in
preparing materials, software, documentation, or training materials that were to be localized. Originally, I had envisioned a 12-page booklet. I assigned several people to write
about their areas of expertise and planned to edit their articles so that the booklet readwith “one voice.” It became clear, however, that to try to take the voices out of the articles would be a mistake. They were fun to read, and each contribution was loaded withthe writer’s personality. So I put each writer’s photo next to the article with a short,humorous biography. This suited the “approachable expert” theme while providing
meaningful and helpful content and lots of personality. As the project progressed, moreideas for articles developed, and the book grew to 80 pages. After distributing a couple
thousand, we created a second edition of 92 pages. The book established the company
as experts and helped the staff people recognize that it was true!
This project is a good example of systems at work and of self-organization. We had theguidelines (approachable experts and educating the customers) and knew how to put theminto practice. The project, however, took on its own life, better than my original idea. Willingness to let the project unfold, instead of trying to control it, led to a fantastic outcome.
And it was a great team effort that worked, even though we never had a team meeting.

Keep It Real Campaign

30

The “Keep It Real” campaign informed account executives not to promise what we
couldn’t deliver to customers. They estimated jobs and priced them on actual time andcosts. They told clients what the company needed from them to do a good job. If a request was unreasonable, however, they discussed it.
One account executive had to notify a customer that she had underestimated a job,which would cost more. This was a hard message for the AE to send, but she did it. The
customer, who had learned that the company dealt honestly and didn’t play games, did
not question the higher estimate. I realized how infrequently we had to do something
like this because we worked so hard to be realistic and there were few surprises.
The campaign also reminded managers to be honest with staff people when there
were problems and not to avoid difficult confrontation. To be confrontational without
being supportive is destructive. Whenever there was a question to be answered or a decision to be made, “keep it real” seemed a useful guideline.

A Learning Organization
All the things I’ve discussed added up to the company becoming a learning organization.
But all of us struggled all the time. When I hired several new people early on and we wonsome new work, the challenge was to deliver quality work. At that time, we were unsuccessful in hiring new employees who understood and were committed to the procedures
their colleagues had created. So I increased orientation and training and altered the management structure to address these issues for the whole staff. Everyone took outsideclasses, we taught each other, and we updated our processes through teamwork.

Volume 3, Number 1, REFLECTIONSThe challenge in every organization isto help people develop along with thesystems and organization.

HICKEY
Applying Systems Thinking in a Small Knowledge-based Company 

We continued to wrestle with the complicated flow of information for project estimating. Some people got frustrated, sometimes tempers flared, and we were not always efficient. I kept reminding them that the company would always have problems and that weshould hope they weren’t always the same problems. We
improved many processes and documented and shared those
improvements in numerous formal and informal ways.
The challenge in every organization is to help people
develop along with the systems and organization. If the two
don’t go together, the growth will be unsustainable. People
have individual assumptions, foibles, and strengths. It is
hard to create an environment in which they can contribute meaningfully, are recognized, and can grow professionally, while dealing with difficult personal interactions.
I worked hard to create an environment in which heroics or “fireman tactics” were notthe order of the day. When an extraordinary effort was needed, I was grateful when someone came through. I didn’t however, support that as the norm. I didn’t want the company
to be reactive, but tried to maintain an atmosphere that promoted learning from occurrences, so we could do a better job the next time, without the heroics. I tried to create systems that supported good work and growth and that encouraged people to go home andhave a life outside too. I wanted growth to be sustainable. In order to be flexible, systems
and procedures must be clear. If employees are knowledgeable and empowered, everythingcan be standardized so they can spend their time creatively working on the other issues
that will always pop up.

Outcomes
The company was reinvigorated, morale revived, and employees became engaged in theirwork. I freed staff to give input that was reviewed and used to improve processes. The
company’s sales increased in 1998 by 133%. I attracted several talented new people andimproved the work lives of employees. From the time I started in May 1997 through theend of 1998, only one staff person left without being encouraged to do so.
The manual of internal processes was effective in demonstrating that the company
had thought through, captured, and communicated how to work effectively for customers, which helped keep old customers and win new ones. We greatly expanded the customer base, which had many positive effects, including reducing an over-reliance on the
biggest customer, while strengthening ability to serve all customers well. The company
was recognized in the national marketplace as a contender for big jobs; some of the biggest companies asked us to bid on major products. Despite the rapid growth—not easy
to manage in a service company—the company was profitable.
Having been a part of this change program has reinforced my impression that theinterrelationships between everything are most important. It is also more evident to me
that the tendency to control can defeat us. When the going gets tough, many managers
want to clamp down, which cuts the flow of energy, thereby putting the organization into
decline. It is difficult to sustain a healthy environment; however, I am convinced that itis the only worthwhile approach to building an organization.

Acknowledgment
I would like to thank Carol Ann Zulauf, associate professor at Suffolk University. Together
we explored concepts and ideas for the content and approach of this article.

References
Chawla, S. and J. Renesch, eds. Learning Organizations: Developing Cultures for Tomorrow’s Workplace (Portland, OR: Productivity Press, 1995).
Jackson, T. Implementing a Lean Management System (Portland, OR: Productivity Press 1996).
Shingo, S. A Study of the Toyota Production Systems (Cambridge, MA: Productivity Press, 1989).

REFLECTIONS, Volume 3, Number 1

31

HICKEYby Deborah Heller

Applying Systems Thinking in a Small Knowledge-based Company

Commentary

32

Deborah Heller
Principal
HellerCunningham

Tim Hickey arrived at a start-up company in transition and tried to create an environment thatwould build on the energy of the past and provide stability for the future. He describes many activities that seem to have been effective by the time he left. In a way, I feel I was seated at a threeact play but left before seeing the third act. I am curious about what has happened since he left,
what worked, what didn’t, and what thoughts he might have about why.
One of the more interesting parts of this story is how a young company makes the transition toa more “mature” organization without losing the excitement, flexibility, and creativity of the earlyyears. Start-ups are almost by definition chaotic, self-organizing systems. The successful ones are
fluid, making it up as they go along and changing and modifying on demand. Employees bringmany talents, skills, and the capacity to apply their abilities to different projects. There are multiple
activities, some collaborative, and some episodic and redundant. While it’s hard to have clear
boundaries and defined spheres of influence when everyone is working with everyone on everything, the intimate work environment provides opportunities to make changes and corrections.
However, as the complexity of business and the number of employees increase, the self-organizing
process hits more “jams” on the way to new configurations. As these jams increase, frustration rises
and energy and morale drop. A loop forms in which business demands escalate, there is diminishedcapacity to meet demands, morale and energy decline, products and service suffer, and business demands increase even more. Not infrequently, this is when everyone is aware that they need a new
way of doing business.
Often the transition to a new way of doing business requires a shift from founder leadership to outside leadership, which can be a bumpy process. Not infrequently, companies in the search for rationality
and predictability gravitate to a more traditional, structured organizational model as they try to establish sorely needed policies, procedures, systems, and standards. This new structure often feels heavy andbureaucratic. Sometimes, the most creative and innovative staff leave, and those who stay remember
only the adrenaline rush of the early days rather than the frequent unnecessary rework, capricious decision making, and insecurities about the next paycheck. After a few years of “structure,” the pendulum
often swings back toward the middle, and companies begin a new search for a leadership model thatblends both creativity and predictability. It is far more effective to find a successful alternative to thehighly structured model, and Hickey’s concern about overly controlled environments and decreased energy reflects his attempts to create the “right” organization for this company’s success.
What does Hickey’s story about a young company in transition tell us? The first challenge is tostay alive. Many of Hickey’s efforts in providing direction, opening communication, involving employees, and providing recognition serve to revitalize and energize staff. He tried many interventions, some quite successful. But graveyards full of failed start-ups bear witness to the fact that
happy, motivated, and energized employees may not be enough.
The ultimate challenge is to create sustainability and viability that leads to continued successand profit. Sustainability results from a combination of factors, not the least of which is the interaction between the demands of the external market and the company’s ability to satisfy those demands regularly and consistently, while continuing to innovate to meet future needs. The businesschallenges Hickey describes are examples of this interaction. They include capturing the voice ofthe customer, developing a business model that provides value through superior products and services, creating processes to deliver the promised products and services that include effectively estimating and costing work, broadening and defining the market, and reaching customers through an
integrated direct marketing program with a consistent look and feel.
As systems thinkers, we each bring a perspective about organizations and about change to thisstory. We also come with a lens, a way of seeing, a point of view, and our own paradigms about organizations. I suspect that Hickey pays attention to energy; to creativity, autonomy, and control; tohuman resources; and to the connection of tools and management concepts. His “way of seeing”
led to various interventions in multiple parts of the system.
My paradigm would probably lead me to focus on strategy, the internal and external system, thedevelopmental stage for the organization, short- and long-term goals, and the transition challenges. As a practitioner, I want to expend the minimum effort for the maximum results in the
shortest time possible. I try to choose only a few high-leverage interventions that will have positive
ripple effects on other parts of the system.
Volume 3, Number 1, REFLECTIONSHICKEY

Commentary
by Göran Carstedt
Hickey gives us down-to-earth, hands-on examples of what terms like customer orientation, organizational learning, empowerment, and organizational growth and change really mean. He alsopresents a good example of what a learning organization really is about.
What will people learn from reading this article? Will readers be able to do much with the advice? I am not convinced. However, this has less to do with the message than with readers’ expectations. People normally expect well-structured advice in the form of “1-2-3 steps or formulas” ortheory-anchored concepts. Hickey gives us a story which confirms that good organizations, capableof growing, changing, and creating their own future, are those in which the leader creates spaceand energy by truly believing in people. Hickey believes that people perform better when they participate and are kept informed, that they support what they create, that involvement creates better
quality and better results, that they want to learn and achieve, and that the more you give people
the more you get back.
Hickey’s story is full of precise examples of how to invite an organization to do something
meaningful, purposeful, and “learningful” and of how to define a direction that is truly customerand coworker-oriented. Hickey’s powerful message is not what he did, but what he did not dowhen confronted by serious challenges. Normally, turnaround cases are about the CEO hero working for his mighty board of directors. However, Hickey’s story is about a whole team working forcustomers and colleagues. Normally, these cases are about driving change by implementing boldplans and about setting stretch targets and measuring and controlling. This story is about listening,making mistakes, having fun, and managing change in small doses within a customer-oriented focus, recognizing and celebrating small steps. Normally, turnaround cases are about undoing what
predecessors and the company have been doing wrong before the arrival of the new CEO. This story
is about bringing out the potential that already exists in the organization and helping people see
the qualities they already have.
What Hickey tells us is that change is less about reorganizing, restructuring, and reengineeringand more about reconceiving. In Dee Hock’s words, “When we reconceive an idea, a product, a company, we create a whole new order and creativity will flood our minds” (Hock, 1999). Change ismore about enabling, interpreting, and caring and less about implementing. Change is consequently the essence of learning.
I can imagine some readers questioning the relevance of this article, since it is built on a smallbusiness case. However, I suggest the opposite. Caring about customers and coworkers often comesvery naturally for smaller companies, and they don’t need an outside consultant to tell them this.
Larger organizations therefore have much to learn from such cases. Being from a small, familybusiness background myself, I have seen the potential in bringing a small-company philosophy intolarge corporations like Volvo and IKEA.
The story is, of course, about systems thinking, but it is also about “people thinking.” To quote
one of my great mentors, Russell Ackoff, “Effective management of a system requires effective
management of the interactions of its parts, not of the actions of its parts taken separately. Thisruns counter to the prevailing practice of management in the West—which is divide and conquer”(Ackoff, unpublished). In that sense, Hickey’s story is truly an example of a good alternative to prevailing practice.
We should welcome reflective practitioner stories and bridge them with theory in order to develop a better taxonomy. We need to better understand the true inner prerequisites for creating
healthy organizations worthy of people’s commitment. That is what Hickey shares with us.
But he leaves me some questions: Why did he leave the company after a year and a half? What
happened to the company after he left?

References

Ackoff, R. “Transformational Leadership” (unpublished paper).
Hock, D. Birth of the Chaordic Age (San Francisco, CA: Berrett-Koehler, 1999).

REFLECTIONS, Volume 3, Number 1

Göran Carstedt
Global SoL Network

Applying Systems Thinking in a Small Knowledge-based Company 

Hickey’s story leaves me wondering what others would have focused on and how results would
have been different or more or less lasting. This story would be a provocative, engaging topic for aconversation.

33

HICKEY

by Tim Hickey

Applying Systems Thinking in a Small Knowledge-based Company

Response
I am grateful for the thoughtful commentaries by Deborah Heller and Göran Carstedt, and I’m sorry
if I left them and other readers “hanging” in the search for an ending. I guess that this did not occur to me indicates how I think. My interest is in organizational development, which is ongoing. In
particular, I am fascinated by the transitional phase Heller describes. This article is intended to illustrate how a transition can happen “without losing the excitement, flexibility, and creativity.” That isindeed the challenge.
The story of the company did not end after a year and a half, nor did I leave at the end of thetime covered by this article. I was there for another year and half. The next stretch was not thesame as the previous, as you would expect. There were successes and failures, ups and downs. The
downs included a small contraction that was very upsetting for many people, but from which werecovered within the year. Overall, the company did very well, and had greatly increased revenues
and profits. At the time of my departure, the company was still growing, while dealing with many
ongoing challenges. Fortunately, the story didn’t end. Profits were at record levels for the company
and in the industry.
Of course, my story also continues. I’m in a new set of circumstances and am currently neckdeep in challenges working at Columbia Ultimate, a financial software company. Columbia Ultimate
is a 20-year-old firm that is reinventing itself. This time, I am the vice president of product management and marketing. As a member of the executive team, I am happy to still be working on organizational development. A particular challenge here is the well-established culture with many
wonderful traits, but that also needs to adapt in order for us to succeed. I have a great boss, andam continuing to learn and grow in a new environment. As Carstedt notes: “Challenge is the essence of learning.”

34

Volume 3, Number 1, REFLECTIONSThe Salty Line Manager
and Organizational Learning:
A Conversation
with Nick Zeniuk

FEATURE

Christine R. Day

A

leader in championing organizational learning at Ford Motor Company, Nick Zeniukand his partner, program manager Fred Simon, collaborated with Daniel Kim, Bill Isaacs,
Peter Senge, and the late Dr. W. Edwards Deming in building the Lincoln Continental team,which set company performance records in multiple measures of quality, timing, and cost savings. Zeniuk continues his involvement in SoL, as a member of the elected governing council
and as one of the “stewards” of the emerging global SoL network. In addition, he serves as an
adjunct faculty member at the University of Michigan-Dearborn where he is responsible fordesigning and conducting organizational learning competency programs.
In July 1995, Ford and The University of Michigan-Dearborn joined forces to create anorganizational learning program for Ford’s component divisions engineering and manufacturing communities. This effort began when staff and faculty members from the College ofEngineering and Computer Science (CECS) at The University of Michigan-Dearborn (UM-D)
met with several members of Ford’s Automotive Components Division (ACD) to discuss thecollege’s interest and expertise in developing an organizational learning program partnership. The director of ACD’s Technology and Process Leadership Office believed that change,
and the capacity to respond to it with agility, creativity, and effectiveness, was a new competency that the automotive industry had to master in order to compete in the global marketplace. Faced with change as a constant, organizations that embrace opportunities forchange welcome innovations to processes, practices, systems, and culture. The ACD director
believed that the five disciplines of organizational learning as defined by Peter Senge connected with some of the most fundamental aspects of change. He envisioned the creation ofa learning community—partnering Ford and UM-D—where both parties would collaborate
in order to create an organizational learning program.
Both ACD and CECS agreed that the five disciplines of organizational learning provided
a framework for change processes. By utilizing organizational learning tools, individuals
and their organizations could move away from “change-fragility” to “change-hardiness.”
Since engineers and other technical staff from the automotive industry would be the primary participants, it would emphasize the five disciplines or organizational learning andfocus on systems thinking combined with traditional engineering problem-solving skills to
help participants resolve business-related problems.
Zeniuk was a member of the project’s external design team. He speaks and presents
at seminars and conferences for corporate, academic, and public organizations. His leadership and success at building high-performance teams has been featured in Fortune,
Automobile, Personnel Journal, and on PBS and NPR. He has authored various articles,
coauthored The Team Learning Lab, contributed to The Fifth Discipline Fieldbook, andhas consulted with corporate, government, and international organizations.

REFLECTIONS, Volume 3, Number 1

Nick Zeniuk
Organizational Consultant
Former Executive
Ford Motor Company
Member, Society for Organizational
Learning Council
SoL Global Network

35

Christine R. Day
Business Solutions Partner
Ford Motor Company© 2001 by the Society for Organizational Learning and the Massachusetts Institute of Technology.

DAY
The Salty Line Manager and Organizational LearningChristine R. Day (CD): You were very active in bringing
organizational learning concepts to Ford Motor Company.
Tell us how you became involved with The University ofMichigan-Dearborn program.

© Linda Cooper

Nick Zeniuk: When I started working on the program, I
had recently retired from Ford Motor Company. I was thebusiness program and launch manager for the Lincoln
Continental program, which became one of the firstprojects to use organizational learning theories, methods,
and tools. It was an extremely successful launch. I participated not only as a program leader but also as ateacher, coach, and facilitator for the organizational
learning initiatives.
After retirement, I thought I would like to pursue thiskind of work, and I was invited to become a consultant
and research affiliate at the MIT Organizational Learning
Center. During that first year, another recently retired Ford
program manager and I introduced several companies tothe work of organizational learning based on our experience with the Lincoln Continental program.
Roger Saillant, who was then a Ford executive, invited
me to participate in the design of a curriculum for The
University of Michigan-Dearborn. The purpose of his request was to ensure that the program had the view of theline manager. Saillant’s perspective was that there were
too many consultants developing this program, both internal and external, and not enough people who had the experience of running a profit-and-loss business. Saillant knew I had business planning
managerial expertise. He wanted to get my input as a line manager.
CD: How did you integrate your business acumen into curriculum development?

36

Nick Zeniuk: I participated in the design meetings with the team, and, in the beginning,
we had significant differences about how to do this work. There was the outside consulting team, which had their own views; then there was my perspective, the Ford people’s
ideas, and The University of Michigan-Dearborn team members’ perspective.
When we started out, there was a lot of emotional discussion about what we wanted
this course to be. My initial struggle was that I did not think it was focused on the work
environment and the work that people were doing. I thought it was a bit—how do I say
this—too “spiritual.” My fear was that this “spiritual” emphasis would turn off engineers. Working over time, I think we developed a course with which we were fundamentally satisfied.
CD: How did the team work through the struggle to make the course more job-oriented?
Nick Zeniuk: We had significant struggles around what the concept of the course work
should be. I was wrestling with certain concepts and, to some extent, trying to make thecourse more like the learning laboratory we had pioneered at Ford. Others, however, werethinking of it as a general course introducing the organizational learning tools and theories and providing people with a spiritual experience that did not engage them in the work.
I ultimately succumbed to the wishes of the majority. I suggested that we should
consider this an introductory course. What I had in mind was that this would become ageneral outline course; later, we could introduce learning labs focused on the work.
CD: What surprised you most about being involved in this project?

Volume 3, Number 1, REFLECTIONSCD: Working on a project of this magnitude frequently brings learning to the team members. What changed for you as a result of this project?
Nick Zeniuk: My own personal learning occurred from being exposed to people withnew, different ideas, and different perspectives. I always find that valuable. Even if I did
not agree with the ideas or the perspectives, that was not the issue. The issue was theneed and the opportunity to listen, to learn, and to expand my perspectives.
I particularly appreciated the learning that occurred from my interaction with Dawna
Markova and Andy Bryner [who wrote An Unused Intelligence: Physical Thinking for 21stCentury Leadership1]. They brought a very unusual perspective, particularly on the physicalanalog exercises and the appreciation for the spiritual sensitivity that I had previously paid
no attention to. I realize now that there is room for sensitivity in an organization. Somehow
we have to develop methods and techniques to introduce these ideas to people in a safe,
nonthreatening way, so as not to close their minds and alienate them from learning.
I learned quite a bit and changed tremendously from the experience. Anyone who
is thinking about developing a similar program should know that people have to do acertain amount of learning on their own. It is advisable and necessary since experience
itself is a growing event. However, there has to be a clear sense of what the university
wants to accomplish within this effort. Once this has been decided, the team can develop
the appropriate curriculum. This goes back to the initial efforts. There is a choice tomake: Should the curriculum be one of general instruction on the concepts, or should it
be focused on engaging people in work?

DAYThe Salty Line Manager and Organizational Learning

Nick Zeniuk: To be honest, I was frequently surprised by the competition that occurred
within the community of people who were in the business of teaching others how to listen better, to be better learners, and to interact more effectively. We as a group—andplease understand that I include myself—were not very good at learning.
People got quite upset about issues. I was particularly surprised that the people who
had been using and teaching these concepts for many years were probably the ones who
most needed to reflect on how they were practicing these learning concepts. Over time,
however, this group of people evolved from individuals, all advocating their own perspective, to becoming a solidified and collaborative team.
I was happy where we ended up. I admit that some team members, especially me,
gave others a really rough time. And, in order for them to deal with an old salty line
manager like me, I suppose they had to use some traditional tactics.

CD: Can you tell us more about the concept of engaging people in work and how it relates to this project?
Nick Zeniuk: We have discovered, over the course of several years working in this field,
particularly in a technical manufacturing environment, that it is much easier to engage
people in learning if it is relevant to their work. If participants sense its usefulness in thework environment and its relevance to the work they are doing, they become more aligned
around the curriculum and more receptive to taking charge of their own learning.
I would advise teams to start out with a learning lab format as the basic course work.
Afterward, the team can proceed into deeper and broader course work depending on participants’ needs. Basically, we conduct only learning laboratories now because that is theformat that the participants really want. I would like to point out that this is not good
either. In a sense, we went from one extreme (the spiritual) to the other (work results)
and have ignored the integrative potential of the individual aspirations with the work requirements.
Now we are concerned that we are not doing this deeper work because people findthe learning laboratory to be quite effective in accomplishing their initial work challenges. They don’t appreciate the need for long-term reflection and learning. They are
getting the easy results, the superficial results, the low-hanging fruit, and not engaging
in personal transformation.

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37

DAY

The Salty Line Manager and Organizational Learning

To begin the transformational work that teams need, individually and collectively,
they must do the deeper reflective work for a sustained period of time. We need to find away to connect the two approaches of reflective transformation and on-the-job application.
CD: When trying to create program value, what roles do you see for an organization’s
leaders?
Nick Zeniuk: To create sustainability, we need to connect the curriculum to work, todemonstrate that organizational learning makes a difference, and it can make a difference
fast. And, in order to do that, people need to take charge of their own learning.
Even more important than curriculum content is engaging leaders. Any initiative that
excludes the leaders from taking a significant role in the transformation is bound to be mediocre or a failure. Sustainability occurs when the “bosses” participate and take charge of theorganizational learning initiatives. Literally, what I mean by engaging the bosses is that theytake charge. They become the facilitators, coaches, and teachers. I am not talking about all
the bosses. I am talking about a few key leaders who feel comfortable with the new role ofcoaching as leadership.
During the past five or six years, we have learned much regarding leadership. Where
the new style of “servant” leadership has occurred, the transformational initiatives havebeen successful. More importantly, these initiatives have been sustainable. Where thiscoaching style of leadership has not occurred, there is no example of sustainability. Examining leadership is part of the work that we were doing at MIT and now at the Society for Organizational Learning (SoL). We are creating leadership programs aroundsustaining change through a new model of how to engage leaders.
CD: What do people find most difficult about this leadership requirement?

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Nick Zeniuk: Some people struggle with these ideas about leadership. I do not knowwhat they know in their hearts, but in their brains, they know the value of it. Unfortunately, the brain is a very small part of the intelligence of the human being. We find it
difficult to engage leaders in this effort of transformational thinking through reflection.
How do we involve the project managers, chief engineers, or program engineers? Is there
anyone who would be willing to take on a leadership role in this kind of transformation?
People do not take on this challenge until someone makes it important. If they wait
for a vice president, for instance, to do that, we have to question how many of them areauthentic about the change. How many of them are doing it because they are told to doit. How many are doing it because it is expected of them?
Learning has to happen through invitation, not direction. There are more thanenough leaders in organizations who would be willing to lead the learning process, who
are anxious to experiment, if they believe the environment is conducive for them tochange their behavior.
Creating a vice president of organizational learning,setting up a big learning organization, and decreeing directives, starting to count the bodies of people who havegone through organizational learning courses, monitoring
how they are doing, using “overs” and “unders,” andholding mandatory quarterly reviews—all of that dooms
the learning program to failure. This actually recreates the old behavior of command andcontrol. Many top-notch people in numerous companies could easily do this work andwould do it willingly, if the senior leaders would ask them. Not tell them, ask them, andthen create an environment where the work is encouraged.
The idea is very fragile, but extremely powerful. The very deep effort that we would
be looking for could come only from the inside of every human being who is involved.
It cannot come from the outside. People need to be invited, they need to be nurtured,and this requires a new style of leadership.
I have talked to people who want to do this work, but they are just a little uncomfortable about it because somehow they are afraid that their vice president will criticize them

Learning has to happen throughinvitation, not direction.

Volume 3, Number 1, REFLECTIONSDAYThe Salty Line Manager and Organizational Learningfor wasting time when they should be out there directing and telling people what to do. Thistelling and directing, of course, is the worst kind of leadership imaginable. We know that.
CD: If you could talk to a company’s senior executives, what would you tell them?
Nick Zeniuk: The interesting point is that the key senior
executives who say they want new leaders and a new styleof leadership exhibit the most authoritarian style in theseactions. Even though they emphatically voice a need forleaders to be coaches and teachers, they do not “walk thewalk and talk the talk.” The dilemma is that these“bosses” don’t know; they can’t see themselves. They areunaware that their actual behavior is grossly inconsistent
with what they tell people.
Fear is prevalent in our organizations—fear of making mistakes, fear of not looking
good, fear of not pleasing the boss. We learn quickly the hierarchy of thought; “please
the boss” and get ahead or at least survive! Who is going to be brave enough to tellthem? That is something I discovered as a boss under the fire of leading a transformation. One of my coaches, Daniel Kim, said, “Nick, you are the boss. You are always going to be the last to know what is really going on. And who is going to tell you?” Hereminded me constantly that my greatest challenge is to invite those people around me,
the ones who could, to tell me the truth and, consequently, to help me see myself. Dr.
Deming—he was a member of the Lincoln Continental team—used to tell us that the eyecannot see itself.
How can the bosses know what is going on? Can they find out through surveys? Orcommittee meetings? Or requests? In the end, these are all superficial. The truth is very
deep, and it takes a great deal of trust in an organization before someone will tell theboss what is really going on or what is on someone’s mind. That trust is grossly lacking
in most organizations right now.

Key senior executives who say theywant new leaders and a new style ofleadership exhibit the mostauthoritarian style.

CD: What do you see most distressing about today’s organization?
Nick Zeniuk: Organizational anxiety and stress levels are so high that people have losttheir sense of purpose in what they are doing. People are just running, running, runningaround in circles, alienated from themselves and their work. Employees frantically work
harder and harder to get different results using the same old methods. Now that is thedefinition of insanity. The cartoon character Dilbert is right! We are sensing our insanity,
but we do not know what to do about it. And the bosses know even less!
A time may come when these management systems will crash. People will quit, vicepresidents will leave, people will burn out, people will become totally alienated,demotivated, fragmented, and the current great years could
go down the tubes. Effective cultural changes are very slow.
Dr. Deming said that our prevailing systems of management
are destroying our people. It is not unique to one company
or another. In my work, I see this, and it is mind boggling.

39

Nick Zeniuk: Many organizations are beginning to reflect on
their prevailing systems of management. The difficulty is thatmany still wait for direction from the top. They wait for thebosses to tell them what they want. That puts too much responsibility on the boss. That manifests itself as the bumpiest organization we can have. When the boss is replaced, theorganization must change, not to meet new business objectives, but instead to meet the wishes of the new boss.

REFLECTIONS, Volume 3, Number 1© Emily Sper

CD: How are organizations using organizational learning
to help cure what is wrong?

DAYThe Salty Line Manager and Organizational Learning

The boss should be engaging the whole organization by saying, “What do we want?”
Then the boss’s role becomes one of providing the leadership, aspiration, inspiration,
and alignment to achieve these goals. That is the new style of leadership versus the oldstyle.
CD: Your business perspective prompted your involvement in this project initially. On reflection, what have you observed about that?
Nick Zeniuk: It is the business results that help you know if people are learning. Otherwise, how could we know if they are learning or what they are learning? We can measure business results. Why not include business results as a component of our learning
methods? Why can’t the teacher be accountable for some of the students’ results? Isn’t
that what great teachers do, accept some of the responsibility, to a certain degree, forwhat their students do? I am talking about teaching students in the “noble” Socratic way.
Our work at The University of Michigan-Dearborn is to help people reflect on theircondition. Our tacit assumptions and thinking are promoting unhealthy behavior in ourorganizations and inhibiting any potential for long-term change. Our role as faculty canbe to introduce organizational learning theories, methods, and tools to help leaders, inparticular, to transform their culture, and their organizations to achieve their personaland collective destiny.

Acknowledgment
This interview is a variation on Nick Zeniuk’s perspective in Discovering Connections,which describes The University of Michigan-Dearborn project (Dearborn, MI: Universityof Michigan-Dearborn Press, 2001). For more information about the book and theuniversity’s organizational learning programs, please contact Engineering Professional
Development, The University of Michigan-Dearborn.

Notes
1. Bryner, A. and D. Markova. An Unused Intelligence: Physical Thinking for 21st Century Leadership(Berkeley, CA: Conari Press, 1996).

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Volume 3, Number 1, REFLECTIONSThe Impact of Transnational
Institutions on Cultural
Values and Vice Versa

FEATURE

Edgar H. ScheinTo put this article into perspective, I need to begin with a bit of my own intellectual history and explain why I am currently interested in the various facets of culture. I obtained my Ph.D. from the Harvard Department of Social Relations in 1952, where my concentration was in social psychology, but where we were all required to be exposed to therelated fields, which, in my case, included sociology and anthropology. I was a student
at the very time that Florence Kluckhohn and Fred Strodtbeck were developing questionnaires to study the values of the four cultures that could be found in southern Utah
(Kluckhohn and Strodtbeck, 1961). I did not at that time, however, get interested in culture. Instead, I found myself early in my career as an Army Research Psychologist at the
Walter Reed Institute of Research doing traditional leadership research.

The Korean POW EpisodeMy first culture lesson came in 1953 when I was ordered to go to Inchon, Korea, to join ateam of psychiatrists, social workers, and psychologists who would debrief American repatriates imprisoned by the North Korean and Chinese Communists for several years during
the Korean conflict. What upset us in the US at the time was that a number of men signed
false confessions, informed on fellow prisoners, marched in propaganda peace marches, andotherwise behaved in ways that were considered to be distinctly un-American. When weinterviewed these alleged collaborators, we found many perfectly sound reasons why people
behaved the way they did, and none of the prisoners returned actually believing in Communism. But the alarm had been sounded by Edward Hunter’s book, Brainwashing in Red
China (Hunter, 1951).
A more dramatic event was the discovery soon after the Korean conflict that a number of civilian students, businessmen, and priests who had been imprisoned on the mainland of China did come out of prison claiming that they had been spies, had been welltreated, and had been given lenient sentences. They proclaimed that we did not really
understand the Communists at all, and several of them maintained pro-communist attitudes long after their return to the US. For these cases, Hunter’s loose translation of theChinese concept of “cleansing the mind of bourgeois middle-class attitudes” into themore ominous concept of “brainwashing” fitted very well.
My first culture lesson came out of the research on these repatriates, which revealed thatthe techniques of re-education used in the Chinese Communist movement and in their prisons were no different from the techniques we use in our own total institutions—social isolation; peer pressure; indeterminate sentences; assumption of guilt requiring self-examination
and, ultimately, confession; punishment for insincerity and reward for sincerity; and total
control of incoming information (Schein, 1956, 1961; Lifton, 1956). But the keys to the seemingly dramatic ideological conversions were (1) different cultural definitions of “crime,” and(2) different cultural assumptions about authority and the rights of the individual.

REFLECTIONS, Volume 3, Number 1

Edgar H. Schein
Sloan Fellows Professor ofManagement Emeritus
MIT Sloan School of Management41© 2001 by the Society for Organizational Learning and the Massachusetts Institute of Technology.

SCHEINThe Impact of Transnational Institutions on Cultural Values and Vice Versa

Western prisoners eventually made sincere confessions of spying and other crimes
against the Chinese people because “crime” was defined not by actual harm but by actions that could, at some future time, be harmful. If a prisoner sent home a postcard
describing a rural scene and referring to the local crop, the Chinese interpreted this as acrime and as spying because it could, under some circumstances, give valuable information to a future enemy. What seemed like an ideological conversion could be seen as
learning some new cultural meanings for old terms such as spying and crime.
Furthermore, if society is culturally defined as being the responsibility of a benevolent government, and the agents of that society deem you to be guilty, then you are guilty
and it is your job to search within yourself to find the source of your guilt, confess, andrepent. The extreme individualistic assumption that derives from Western legal concepts,
in which you are innocent until proven guilty, in which you have all kinds of rights ofdue process, and in which you can accuse and sue your accusers, is not shared in manyother cultures. If anything, our system is the exception in the larger cultural mix of the
globe. What we did not understand after Korea was the Chinese Communist culture, especially their semantics or their definitions of things.
What I learned from this is that culture not only is about values, but goes much
deeper into the thought process itself. Culture deals with the more implicit meanings ofthings, something that I should have learned in my anthropology class but needed toexperience before I really understood it. One important implication is that from such acultural perspective, it is not at all clear whether there are
human rights and values that supersede particular cultures and societies, because different cultures start withdifferent basic assumptions about the nature of nature,human nature, and the appropriate relationship between
and among humans.
It should be noted that until recently, we took culturalborders to be relatively isomorphic with national borders
or groups of nations. Thus we talk about Latin cultures
and Asian cultures. Only in the past 50 years or so, have
we begun to look at organizations and occupations as creators and dispensers of “culture.” And that now raises the fascinating question of the relation of corporate culture
to national culture. Can large global companies actually impose their values and concepts onto nations, and is there any evidence that they do so?

Can large global companies actually
impose their values and concepts
onto nations, and is there any
evidence that they do so?

Corporate Culture vs. National Culture
42

Corporations clearly influence the operation of their subsidiaries in various countries,
even if the national culture of the corporation’s home is dramatically different from thenational culture of the subsidiary. A World War II story about the old National Cash Register Co. (NCR) makes that point. NCR’s founder, John H. Patterson, taught all of his subsidiaries the importance of sales targets. During the occupation of Paris, the French NCR
subsidiary located on the Champs Élysées was busily boarding itself up in anticipationof German tanks rolling down the Champs. Before they were quite finished, one tankbroke ranks and drove right up to the NCR office. The hatch opened up and a German
officer climbed out, knocked loudly on the NCR door, and said, “Hello, I’m Schmitt, NCR
Berlin; have you met your sales targets this month?” (Allyn, 1967)
I visited the offices of Digital Equipment Corp. (DEC) in its heyday and found remarkable uniformity in the physical layout of its offices all over the world and uniformity of personnel practices, the way meetings were run, and, most important, the kindof people who worked there. They all fitted the DEC mode of strong individualistic
assertiveness, a strong sense of independence, and an ability to define one’s own job andwork pattern. A visit to the Paris office revealed the depth of such influence. The personnel manager, a young Frenchman, had been in his job for one year. He said that when
he was first hired, he was told that he would have to define his own job, but he knewthat in the French culture, he would have a strong boss who would tell him what to do
and how to do it. To his amazement, he was not given any guidance. Whenever he went
to his boss or even colleagues, they would say, in effect, “You figure it out; that’s what

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SCHEINThe Impact of Transnational Institutions on Cultural Values and Vice Versa

we hired you for.” He found this to be very “un-French”
and resisted for nine months. When he finally asserted
himself, he got immediate positive reinforcement, but henoted that the more he became able to work in the DEC
world, the more he had to give up his “Frenchness,” to thepoint that he feared he would never again be able to work
for a French company!
Seeing such corporate uniformity and clout tempts
one to attribute global power and influence to the global
corporation. But if we look at this influence process insomewhat greater detail, we see several different patternsof influence that need to be distinguished:
1. Cultural diffusion through forced compliance andnatural selection. Some cultural diffusion from corporations to national cultures clearly occurs. The French personnel manager from DEC gave up his Frenchness in order
to fit into DEC. At DEC, if a local was not willing to comply, he was gradually forced out of the organization. DEC
thus became a lot of little DECs worldwide, and one could
argue that the locals, in effect, gave in to and compliedwith the DEC culture.
Failure to comply can cause the parent organization tobe punitive. For example, during the late 1970s when
CIBA-Geigy owned Airwick, the finance manager of theFrench subsidiary requested permission to institute a new
accounting system that would be more responsive to themarketing needs of Airwick. The corporate head of accounting in the Basel headquarters told her that the CIBAGeigy system had been good enough for them for ahundred years, so they saw no need to change it just for a
local unit. In this case, we have one kind of corporate culture forcing itself on another, but underneath it was thenational influence that the traditional CIBA-Geigy accounting system fitted better into the
French culture than the new Airwick system would have.
One mode of cultural influence, then, is that the global corporation selects out fromlocal national variation those people who fit the corporate culture and creates, thereby,
local cells of a new kind of culture within the national boundaries. Over a period of time,
one would then see a growing diversity of cultural assumptions within each nation thathosts global corporations. Thus, the Japanese style of management and the assumptions
underlying it show up in the US not only through academic literature but through thelearning of US employees in Japanese subsidiaries. Similarly, the highly pragmatic, taskoriented, individualistic US management systems increasingly penetrate into Latin andAsian cultures, where they might not be a natural fit initially, through selecting out theindividualistic pragmatists in those cultures. The global corporation thus becomes anagent of cultural diffusion worldwide, just as television has diffused Western culture
worldwide. However, in the case of the corporate diffusion, one sees more of a two-way
influence, with Latin and Asian methods also beginning to penetrate the traditional Western models. I have also heard that African tribal methods of organizing and managing
are getting some attention within South Africa. If African companies become global, still
another source of influence on the West might arise.
Right now, the evidence would suggest that Western business methods are being
forced onto many other cultures that might do things differently if left to their own devices. Particularly, the financial planning models, budgeting processes, shareholders as
primary stakeholders, and task-driven organizational forms seem to be superceding business models based on broader social values, the acceptability of lower rates of return,
employees as stakeholders, and relationships being just as important as tasks.
A number of authors have pointed out that there are many forms of capitalism,
which allow for cultural variations within the broader concept (Hampden-Turner and© Emily Sper

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44

Trompenaars, 1993; Trompenaars, 1993). The difficulties that American consultants experienced working in Eastern Europe highlight the degree to which compliance is limited in societies that have been brought up on some different cultural assumptions aboutstakeholders. This broad resistance does not reduce the previously identified diffusion
process by selection of those members of the society who take to the new model, but ithighlights that there are limits to what can be diffused into a given culture.
2. Cultural resistance. A large American global corporation mandated that all of its
subsidiaries would use a performance appraisal system that required an open dialogue andevaluation between a boss and his or her various subordinates. They were so convincedthat such open evaluation was essential to performance improvement that they mandated
it worldwide and instituted extensive training programs to insure compliance. The manager of international personnel assured me that they had successfully instituted this system of open appraisal in all of their Asian subsidiaries. However, when I had occasion tointerview several members of their Japanese subsidiary, I was assured with many embarrassed smiles that, “Of course we do not do that in Japan. We have other ways of getting
across information without confronting each other face to face. We do, however, reassure
our US managers that we do the appraisals just as they require us to do them.”
One could anticipate that any time a corporate culture is based on assumptions that
violate pivotal national cultural assumptions, one would get resistance. For example,
when it was discovered that the Japanese were having great success with “quality
circles,” many American companies tried to import that methodology into their US
plants. The quality circles mostly failed because the US culture does not support the kindof group effort that was integral to the concept. On the other hand, the notion of statistical quality control, gathering and disseminating good data on quality levels and feedingthat back to production workers, was a big success. It was the circles, the group activities, that did not fit the US culture and were, therefore, rejected.
In the countries that lived for decades under Communism, one might anticipate all sortsof resistance, particularly to assumptions that put employees at a disadvantage relative toowners. And within those cultures that put a value on employees, one will see great differences between those that have leaned toward a labor class and unionism versus those thathave leaned toward paternalism and noblesse oblige (more the pattern in Latin cultures).
The “diffusion through natural selection” mechanism works only within the rangeof variation that already exists within the host culture. If the global corporation operates
from some assumptions that are universally in conflict with local assumptions, one will
see resistance and subversion. Whether or not one would find eventually an acceptanceof more face-to-face openness in Asian cultures remains to be seen.
3. Cultural blending. The best examples of blending occur in the various joint ventures that have been created in the manufacturing sectors of global businesses. DEC’splant in Taiwan was run by a Chinese plant manager who clearly adapted DEC’s culture
to the local Taiwanese culture. The joint venture between General Motors and Toyota that
led to the integrated plant (NUMMI) in Fremont, California, was explicitly designed foreach company to learn from the other and, implicitly, to test how one could integrate
American and Japanese manufacturing methods (Cutcher-Gershenfeld and others, 1998).
Whether or not such blending will actually occur seems to depend on several structural conditions. First of all, the two or more organizations that represent different cultures must have a strong commitment to common goals, or, alternatively, must be facing
a common task or problem. If they do not have such a common focus, there is a tendency
toward what Salk (1993) calls a cultural mosaic—the cultures will coexist as best theycan. Second, the two or more organizations must be made up of employees who see theircareer futures in the new organization, not the parent companies. Cultural blending is
psychologically so difficult that people will not work at it unless their own career futures
depend upon it. The best conditions for blending are, therefore, career dependency on
the new venture and a new crisis that must be dealt with collectively.
4. Cultural learning: the case of Singapore. Cultural blending can occur at the national level if the learning of new ways of doing things becomes a national strategic priority. As Singapore emerged from its colonial status, its leadership decided that theeconomic health of the new nation could be guaranteed only if multinational companies
could be enticed into doing their manufacturing in Singapore (Schein, 1996a). In order

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to turn itself into an attractive host to foreign multinationals, Singapore created an economic development board (EDB) that was largely run by Singaporeans who had alreadyshown (1) an interest in internationalism as evidenced by desire to learn foreign languages and go to school overseas and (2) an interest in technology and business. The
government stimulated this trend by having generous scholarships available for talented
students who wanted to study abroad.
The culture that evolved within the EDB was a hybrid of Chinese and Western assumptions. More important, the culture of the EDB was geared to the assumptions andvalues of the business community, even though the EDB functioned as a semi-autonomous
government bureaucracy. By learning how Japanese, European, and US managers of multinational corporations thought, and by making Singapore the kind of clean, non-corrupt,
crime-free, efficient environment that businesspeople were looking for, they did succeedin creating an “economic miracle.” In my interviews of corporate CEOs who had decided
to move some of their operations to Singapore, the single most telling remark that they
made over and over again was “the [Singaporeans] thought like businessmen.”
Visitors to Singapore are immediately struck by the fact that the whole city-state
operates more like a giant efficient business than a multifaceted nation. This is no accident. The nation’s decision to provide jobs and housing for people as the first priority
was a strong driving force, and the evolution of other institutions such as the legal system, the arts, and the pursuit of cultural diversity have had to follow. Singaporeans believe that their blending of Chinese cultural themes with the themes that underlie global
business ventures give them a competitive advantage in opening up business opportunities within China. The EDB also has opened a consulting service that offers developing countries worldwide insights on how to create a viable economic program within agovernment bureaucratic structure.
Parenthetically, one of the most important cultural lessons from Singapore is how
to create a business-oriented culture within a government bureaucracy. In a sense, wehave a bigger potential conflict culturally between the values and assumptions of government and the values and assumptions of corporations. Singapore is a model of how
to operate an EDB that smoothes the entry of businessrather than putting various kinds of roadblocks in the way.
One of the most important elements of that smoothing is
an explicit rejection of any form of corruption, bribery,
kickbacks, etc., and, as many executives put it, “always
keeping your promises.”
The lesson from the Singapore experience is that cultural conflicts do not always reflect nations or regions. In
my own observation, more important differences in assumptions often arise between occupations and between institutions within society. In
particular, I think there are strong differences between the engineering occupations that
idealize a world without human intervention, the operational occupations that idealize
teamwork, openness, and human contributions, and the executive occupations that idealize financial viability and growth (Schein, 1996b).

The lesson from the Singapore
experience is that cultural conflicts
do not always reflect nations or
regions.

Theoretical Reprise—What Is Culture?
The reader will have noticed that I often used both the term “values” and the term “assumptions” in reference to the concept of “culture.” I believe there is still a lot of confusion about how to define culture and think about it clearly. For me, the best model is one
that thinks of culture as existing at several levels: (1) manifest, visible, feelable artifacts
that are easy to experience but hard to decipher; (2) espoused values and ideologies thatare put forth as the explicit reasons why things are done the way they are; and (3) shared,
tacit assumptions about how things are and should be. When one examines a given culture, one finds many conflicts between the observed artifacts and the espoused values. If
one then digs further to find out what “drives” the actual observed behavior, one discovers the shared, tacit assumptions.
Notice that the middle level is called “espoused values,” which is intended to coverideology and the various values that are openly discussed and sometimes debated within

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SCHEINThe Impact of Transnational Institutions on Cultural Values and Vice Versa© Roy Sper46

a given cultural unit. The problem is that in most culturesthat I have studied, the actual behavior of members does
not correspond in varying degrees to the espoused values.
What drives behavior is what Argyris (1990) has called“theories in use” as opposed to “espoused theories.” His
use of the term theories denotes the point that I made central to my definition of culture, namely, that culture ismore a matter of cognition and thought than a matter offeelings and values. It is the taken-for-granted, shared,
tacit assumptions that people hold which make up the essence of culture. Much of this is embedded in language,and language, of course, is the primary mechanism bywhich we think.
If we define culture as the taken-for-granted assumptions—the thought processes of a group—what then becomes of values? I would suggest that values now have to
be divided into two categories: (1) espoused and negotiable values, and (2) taken-for-granted and non-negotiable values. I believe that some values have historicallyworked so well for a cultural unit that they lose their status as a value to be debated and become part of the takenfor-granted thought process. At that stage, if someone
challenges the value, we consider him or her “crazy” anddo not deign to even discuss it. Can you imagine a serious
discussion within the US of Individualism vs. Groupism?
Could one make a case in this society for a Kamikaze pilot training school?
On the other hand, it might seem just as “crazy” for a Chinese government official toallow an individual to destabilize a carefully constructed consensus, or for a Singaporean
official to allow the growth of an opposition party that would undermine the economic
well-being of the state. The dilemma of trying to identify universal human rights based ona universal system of values is that we are talking about both kinds of values. We can espouse certain human rights, and many cultures can officially subscribe to them. But ifbehavior based on those rights violates deeper taken-for-granted values that have become
assumptions, we will observe that the behavior reflects the deeper assumptions.
I believe that the great value of the Kluckhohn-Strodtbeck dimensions is that they arecloser to what I would call the taken-for-granted assumptions that exist within cultures—
the nature of nature, the nature of humanity, the nature of human activity, the nature ofhuman relationships, the nature of truth, the nature of time, and the nature of space. If
we examine the assumptions that different nations, occupations, and organizations havealong these dimensions, we will understand right away some of the cultural dilemmas thatthe world faces. But we must get beyond superficial understanding and really get into thethought processes of cultural groups before we can claim to understand the cultures of
those groups. In other words, if we are talking about shared, taken-for-granted, nonnegotiable, largely unconscious values—what I would call assumptions—then we are really talking about the essence of culture.

References
Allyn, S.C. My Half Century with NCR (New York: McGraw-Hill, 1967).
Argyris, C. Overcoming Organizational Defenses (Boston: Allyn & Bacon, 1990).
Cutcher-Gershenfeld, J., et al. Knowledge-driven Work (New York: Oxford University Press, 1998).
Hampden-Turner, C. and F. Trompenaars. The Seven Cultures of Capitalism (New York: DoubledayCurrency, 1993).
Hunter, E. Brainwashing in Red China (New York: Vanguard Press, 1951).
Kluckhohn, F.R. and F.L. Strodtbeck. Variations in Value Orientations (New York: Harper & Row, 1961).
Lifton, R.J. “‘Thought Reform’ of Western Civilians in Chinese Communist Prisons.” Psychiatry 19(1956): 173–195.

Volume 3, Number 1, REFLECTIONSSCHEIN

Commentary
by Arie P. de Geus
At first sight, this subject may seem somewhat obscure: the mutual influence of the cultural valuesof one institution (for example, a transnational institution) on those of a wider institution (for example, a nation-state) that the former has entered, or of which it has become a member or a citizen.
Schein’s interest in the subject may have started during the Korean POW episode. For me, thepractical implications of his “clash of assumptions” resonated loudly through the world oftransnationals some 20 years ago. As an expatriate executive, I struggled with several of these implications, not in the least because there was a period during which some nation-states, especially
the US and Great Britain, enacted legislation that embodied their own cultural values, with the intention of imposing them on the values and assumptions of other nation-states through the medium of transnationals (whether of US origin or not). I express no judgment on these values. Since
they are Western cultural values, they harmonize with my own tacit assumptions. That was certainly
the case with the legislation opposing bribery as a means of securing business abroad (remember
Lockheed?). But what to do when the subject became the ethics of the host country’s government?
Reprehensible though these ethics may be, what was I to do with the one-sided imposition of one
nation’s cultural values on another nation and the threat of punishment of the multinational piggyin-the-middle? This one-sided imposition was in direct contradiction to Schein’s conclusions: “Somecultural diffusion from corporations to national cultures clearly occurs,” but “one sees more of a
two-way influence”; “there are limits to what can be diffused into a given culture.”
At the time, in the 1970s, I had not read any of Schein’s works, but as a student, I had been
influenced by the thinking of William Stern, a founder of developmenta l psychology and a forerunner of Piaget (Stern, 1923). Stern postulated that tensions at the level of values and beliefs
between an institution (for instance, a multinational corporation) and the world around it leadto a process that he called introception. This process builds inside the multinational corporationa greater awareness of self and of the world. The company must develop a sense of the relationship between its own cultural priorities and the values in the surrounding world. And this process is mutual.
The company has an influence on the world as an example, as a “role model,” but it can neverequalize the world’s (or a particular country’s) values with its own. On the other hand, neither can
the world or the country completely impose its values on an individual company. Moreover, according to both Schein and Stern, the mutual influence is weak in the present. The most important effectof the radiation of company values on society will take place in the future. The examples given byideas and work need time to be absorbed.
The oldest and largest multinational of all, the Catholic Church, experienced this slow mutual
reciprocity early on. When the new Christian values started to penetrate, first in the Mediterranean
Roman world and later into Western and Northern Europe, a process of slow mutual influencing of
the cultural values of one institution (the Church) on those of a wider institution (the existing pagan societies) took place.
According to Richard Tarnas:
The Christian assimilation of the (pagan) mysteries extended to the various pagan deities as well,
for as the Greco-Roman world gradually embraced Christianity, the classical gods were consciously or unconsciously absorbed into the Christian hierarchy (as later would occur with theGermanic deities and those of other cultures penetrated by the Christian West) (Tarnas, 1993).

REFLECTIONS, Volume 3, Number 1

Arie P. de Geus
Visiting Fellow
London Business School

The Impact of Transnational Institutions on Cultural Values and Vice Versa



Salk, J. “International Shared Management Joint Venture Teams.” Unpublished Ph.D. dissertation,
MIT Sloan School of Management, Cambridge, MA, 1993.
Schein, E.H. “The Chinese Indoctrination Program for Prisoners of War: A Study of Attempted Brainwashing.” Psychiatry 19 (1956): 149–172.
Schein, E.H. Coercive Persuasion (New York: Norton, 1961).
Schein, E.H. Strategic Pragmatism: The Culture of Singapore’s Economic Development Board (Cambridge, MA: MIT Press, 1996a).
Schein, E.H. “Three Cultures of Management: The Key to Organizational Learning.” Sloan Management Review 38 (1996b): 9–20.
Trompenaars, F. Riding the Waves of Culture (London: The Economist Books, 1993).

47

SCHEINThe Impact of Transnational Institutions on Cultural Values and Vice Versa

48

Slowly, over a very long period, the Church’s teachings were changed by the value system they foundin the Mediterranean and West European pagan societies. In turn, those societies changed their value
system by the interaction with the Christian value system. All this happened 2,000 years ago and wasan example of introception at the deep-seated level of religious values and assumptions. The process
took centuries to arrive at a state of equilibrium. I am not suggesting that nowadays it would takeequally long. Yet, both Stern’s and Schein’s conclusions of the limited influence of a multinational’s
cultural values in the present and the slow two-way influence in the long run have important practical implications, even in today’s world of great visibility and immediate communication.
These are not reasons to be pessimistic. Undesirable or reprehensible behavior on the world
scene can indeed be influenced in a direction that is more acceptable to a majority of world citizens. However, if Schein’s conclusions are indeed the answer to his question, “Can the large global
companies actually impose their values and concepts onto nations, and is there any evidence thatthey do so?” several conditions will have to be met before positive results can be expected.
First, the norm against which reprehensible behavior will be measured has to be, indeed, a reflection of the majority. Clearly, it cannot be a norm that is favored only by the developed West. One of
the few norms that now meets this requirement is the Universal Declaration of Human Rights(UDHR). Fifty years after its conception, the declaration has been signed by some 170 nation-states.
Secondly, we cannot overestimate the importance of the much more recent move of breaking
the immunity of sovereign power, behind which incumbents of nation-states could commit infractions of these human rights with impunity. The Courts of Justice for Bosnia and Rwanda are, I hope,
only a beginning. Yet, the way they work is through a reactive correction by punishment after thefact. The crime has been committed; international policing has to be successful in catching the culprits before punishment can take place and an example can be set (which then should be a warningfor other wrongdoers).
Introception is a superior, if slower way of improving behavior. If it means the spread of a“world” culture, so be it, provided it leads to an improvement of the quality of human life on thebasis of a generally accepted standard like the UDHR and not an elitist Western set of values. At thesame time, Stern’s and Schein’s conclusions tell us that it is pointless to pressure from the outside
to bring about immediate change in the actions of a reprehensible regime like apartheid, a regime
like Iraq’s, or the previous military regime in Nigeria. Boycotts and extraterritorial legislation do notnecessarily produce faster results and risk creating a lot of collateral damage. Rather, there is a casefor encouraging multinational institutions and companies to stay put rather than to force them toleave the country concerned. Change can be brought about only from the inside. Change occurs
through dialogue, not through confrontation, and the change agent has to be an inhabitant.
For all these reasons, it is encouraging to see that there are initiatives like the Global Compact,which was formally launched by the UN Secretary General Kofi Annan. Here again, the UDHR isproviding the standard, together with the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work and the Rio Declaration on Sustainable Development. The
companies that signed the compact will stand stronger in their opposition to local legislation in thehost countries that violate those rights. The compact will help them in (legal) arguments with thesegovernments, since almost all member states of the United Nations are now themselves signatories
to the UDHR. Finally, it will allow the multinational companies to stick to their own ethical standards, if they know that their refusal to engage in debatable behavior would not create an easy opportunity for a competitor to steal a march on them. This makes it possible to show ideas andbehavior that, over time, will, to quote Schein, lead to “some cultural diffusion from corporations tonational cultures.”

References

Stern, W. Person und Sache (Leipzig: Verlag von Johann Ambrosius Barth, 1923).
Tarnas, R. The Passion of the Western Mind (New York: Ballantine, 1993).

Volume 3, Number 1, REFLECTIONSLearning to Be Complete:
The Challenge of Cultural
Dynamics

FEATURE

Philip L. RamseyImagine you are part of an industry that prides itself on its ability to learn. It
has made huge advances over several decades with constant improvements
to the technologies it uses and the service it provides to customers. Would you
expect that your industry’s ability to learn applied to all areas of its operation?
Or might your ability to learn in one area of your operations lead to neglect ofother areas?
The dynamics of an organization or industry’s culture make it difficult toachieve balanced learning. And, significantly, because of the way cultural processes operate, areas that are neglected are often ones vital to the culture’s survival. Consider the case of the aviation industry. It is easy to appreciate howmuch learning has taken place within aviation when we view film of early attempts at flight. And we are familiar with the thorough investigations that follow air accidents, and the industry’s readiness to put lessons learned fromsuch investigations into operation. Yet the history of air-accident investigation
highlights the dramatic effect of culture on learning.
For much of the early history of air-accident investigation, there was astrong technical bias evident in reporting. Investigators explored and reported
on technical malfunctions in detail, while they made little further examination
into accidents that involved human failings and were generally attributed topilot error (O’Hare and Roscoe, 1990). And while fine distinctions were being
made regarding technical failures, pilot error was a causal factor in over 70%
of air accidents in the years 1959 to 1989 (Helmreich and Foushee, 1993). So
despite data indicating that human factors were the leading cause of air accidents, for years, the industry’s preference for investigating technical factors
limited what could be learned from accident reports.
A further cultural factor shaped what the industry could learn from accidents. Aviation has a strong tradition of individualism, assessing pilots onwhether they have the “right stuff.” Not until the early 1980s did analysis of
documented incidents and accidents establish that pilot error was most commonly a failure of coordination or communication between members of an aircrew, rather than the lack of proficiency of one particular member (Helmreichand Foushee, 1993). In summary, the culture of aviation biased the industry
toward looking for technical causes of accidents and, when dealing with human causes, to assume that solutions were best dealt with through improved
individual proficiency. It was as if the industry as a whole had a blind spot
preventing it from seeing clearly the nature of some accidents.
John Nance expressed the perplexing nature of this cultural bias in Blind
Trust (Nance, 1986):

REFLECTIONS, Volume 3, Number 1

Philip L. Ramsey
Lecturer
Massey University49© 2001 by the Society for Organizational Learningand the Massachusetts Institute of Technology.

RAMSEY
Learning to Be CompleteIt was so obvious—so painfully obvious—but most of those engaged in commercial aviation couldn’t see it, or wouldn’t. Human beings engaged in a human enterprise are subject to human failures.

To understand better why members of an organization or industry might experience a similar bias in their learning, we need to consider more closely the
dynamics of culture. What is culture and how does it shape preferences forlearning? How might you uncover the blind spots in your organization? And
how can culture enlighten efforts to create learning organizations?

What Is Culture?
It is tempting to think of an organization’s culture as a thing. Culture might bebetter understood as a collection of differences. When people talk about theculture of their organization, they generally describe it in terms of differences.
They might say, “Where other companies might do A, we would do B,” or “welike to X rather than Y.” People define the culture that identifies their group ororganization by contrasting it with others. How do these differences comeabout? Charles Hampden-Turner and Fons Trompenaars(1993), researchers and authors on culture, suggest that
cultural processes can be understood through the use ofdilemmas.
Groups are constantly being presented with dilemmas—choices between two apparently opposite values.
Two dilemmas presenting themselves early in the history ofaviation were: Should our focus be on finding technical or
human ways of improving operations? And should we view flying as a pursuit
carried out by individuals or by teams?
All manner of variables will govern the initial choices made by a grouppresented with such dilemmas. In aviation, we can easily imagine that theengineering background of early aviators, connection with the military, and the
difficulty of getting more than one person in an aircraft encouraged the choiceof technical and individual responses to the dilemmas. Once a decision has
been made, if it generates valued outcomes, the group is more likely to takethe same option the next time the dilemma arises. And should the group favor
one value over its opposite several times, the choice slips beneath the level ofconsciousness—it is a choice that no longer has to be justified, having become“the way we do things around here” (Bower, 1966).
Considering a culture as a collection of differences held unconsciously enables us to see that any culture is both good and bad for our organization. It isgood because it presents us with certain valuable results and bad because it prevents us from achieving results available to other cultures. It makes sense thatthe aviation industry has a culture characterized by individualism and a focus ontechnology. However, this makes it harder to do some things that come easily toindustries with cultures that emphasize collectivity and concern for people.
It may seem that there is an endless variety of differences we could use todistinguish between cultures. Some differences in values that most people haveencountered are: tendency to praise and tendency to criticize; desire forplanned outcomes and desire for emergent outcomes; focus on task and focus
on relationships; concern for business efficiency and concern for customers;
and risk seeking and risk avoiding. However, sociologist Talcott Parsons (1951)
suggested that five pairs of values exist in any social system and can be used
to understand the character or culture of that system. Other pairs of complementary values can be understood as variations on these archetypal pairings.
The values identified by Parsons were:

People define the culture that
identifies their group or organizationby contrasting it with others.

50

 Emotionally charged and emotionally neutral—In some social systems, highvalue is placed on having people engage emotionally with one another,where, in others, value is placed on being emotionally neutral or objective.

Volume 3, Number 1, REFLECTIONSRAMSEY
Learning to Be Complete Diffuse and specific—Social systems generate different ways of dealing
with complexity. One way is to view the subject in an integrated or diffused way, attempting to connect all parts of the subject into one view.
The alternative is to take an analytical or specific approach, untangling theparts of the whole and dealing with each in isolation. In terms of relationships, some cultures are diffuse, encouraging individuals to relate to one
another in a multidimensional way. Others are specific, encouraging aseparation between the relationship people might have socially and the relationship they have at work.
 Universalistic and particularistic—Social systems determine how tohandle incidents when someone acts outside the established rules. The
culture of some groups encourages the establishment of universal rules,
where the same standards are applied to everyone. Other groups havecultures that allow for exceptions to be made in particular cases, depending on the situation or the people involved.
 Ascription oriented and achievement oriented—Within social systems,
decisions are made about how status is awarded. In some cultures, weaward status to people once we see what they are able to achieve. In othergroups, people have status ascribed to them before they have achieved
anything; people may be awarded high status on the basis of family, caste,
and school, or on the basis of age and seniority.
 Self-oriented and collectivity oriented—Some social systems operate on
the assumption that if individuals are given the opportunity to pursue
their individual interests, the group as a whole will be better off. Other
cultures place greater emphasis on the collective, assuming that the needsof the group as a whole should be given priority, even if this means occasionally sacrificing individual freedoms or opportunities.
How do the cultural preferences of aviation considered earlier fit within
Parsons’s value dimensions? The tendency to individualism directly relates tothe preference for self-orientation. While the connection between technology
and Parsons’s values may be less obvious, it is discernible. Working with technology rather than people appeals to values of emotional neutrality, specificmeasures, and universalism. Or, in the opposite perspective, our relationships
with people tend to be highly emotionally engaging, particularistic, and diffuse.
Consequently, the technological background of aviation, along with the discipline and rigor needed in flying, lead those involved in the industry to feel thatthese values are less desirable than their opposites.

51

Many assume that the relationship between different values
is simple and linear. If you wanted to describe a culture, you
could draw a continuum between values in each pairing anduse these to plot the relative position of a group’s assumptions. While such measures are useful in providing a snapshot of the position of a culture, they do not represent the
dynamics of such differences in living systems.
Anthropologist Gregory Bateson (1974) used values to
explore differences between societies. He observed thatdifferences between cultures were characterized by mutual relevance: the values of one group were different but
complementary to another. You may have observed thesame thing when visiting a country or organization different from the one in which you are at home. Do the differences indicate to you what is lacking in your own culture?
Given that many people report this is the case, surely it is
not coincidental. But why should it be so?

REFLECTIONS, Volume 3, Number 1© Emily Sper

Difference Dynamics

RAMSEY
Learning to Be Complete

The mutual relevance of different values indicates that any value has an
opposing, complementary value. It further suggests that the value pairs outlined
by Parsons are interdependent, so that the more a person or a group emphasizes
one value, the more it creates a need for its complement. For instance, the morea group emphasizes individualism, the more it creates a need for community
building, and the more it emphasizes collectivism, the greater its need for individual identity. This interdependence of opposing values is variously referred toas “complementarity” (Bateson, 1974) and the “circularityof values” (Hampden-Turner, 1990).
Complementarity indicates to organizations where
their particular learning challenges are likely to be. By establishing what it is they value—perhaps examining eachof the pairs articulated by Parsons—they can consider theconsequences of neglecting the opposing value. What isvalued within a culture thus suggests areas where that
culture may have a learning blind spot.
If organizations are living systems in which complementarity is essential for a sustainable future, then, unlessdifferent values can be reconciled and the circularity of values established,
an organization would be incomplete. At the same time, culturallyderived value differences are the source of strongly felt reactions that can prevent people from understanding what is obvious to others, disrupting the circularity of values. Strong reactions may also signal that a culture is experiencing acultural process Bateson termed schismogenesis. Schismogenesis is also central
to understanding the cultural context of efforts to create learning organizations.

The more a group emphasizes
individualism, the more it creates aneed for community building, and themore it emphasizes collectivism, thegreater its need for individual identity.

Schismogenesis: The Splitting Apart of Values

52

While organizations may need to reconcile values that are complementary, theprocess by which a culture develops makes this difficult. In particular, the unconscious prioritizing of one value will mean that it is overemphasized at theexpense of its opposite. Schismogenesis is the process by which this naturaldifference between complementary opposites becomes magnified and differences become irreconcilable.
The process of schismogenesis was evidently in operation within aviation,and can be used to account for the “blindness” to issues relating to people andteamwork. Because of the value given to technology, those considered best
suited to investigate accidents would be people with technological expertise.
Where causes of accidents were found to be related to people, solutions werequickly assumed to relate to their technical proficiency. And where membersof the industry came into contact with people who might help them addresshuman failings, the language used seemed “soft” and inappropriate for critical issues such as causes of accidents.
As an industry, aviation has had to deal with these issues, finding a place forvalues that do not appear to belong within the flying culture. In particular, thishas involved efforts to train flight crews in crew resource management, addressing the team coordination and communication issues that had been neglected.
But what insights into efforts to build learning organizations can begained from an understanding of culture and schismogenesis?
Charles Hampden-Turner and Fons Trompenaars (1993) established thatthe cultures of English-speaking democracies, such as the US, Britain, Australia, Canada, and New Zealand, are characterized by the valuing of universals,
specifics, individualism, and achievement. While their research did not identify emotional neutrality as characteristic of these countries, many people
would accept that, in their organizations, it is considered more “business-like”
to be objective rather than emotionally engaged. Emphasis on these valuesmeans that values related to relationships, emotional engagement, integration,community, and ascription are relatively neglected. In other words, in theseVolume 3, Number 1, REFLECTIONSRAMSEY
Learning to Be Completecountries, it is assumed that the right way to run organizations is to hold individuals responsible for the achievement of specific, analytically establishedstandards that we apply universally. We could conclude that schismogenetic
processes were operating if people and organizations within these countries
struggled to learn in areas associated with the opposites of these values. I believe that interest in learning organizations is evidence of this struggle. Consider how the work reported by Peter Senge (1990) in The Fifth Disciplinereflects the value dimensions described by Parsons.

Disabilities and Disciplines from a Values Perspective
The Fifth Discipline shaped the way many people think about this body ofknowledge, and the way in which many organizations have pursued the goalof becoming a learning organization. Among other things, Senge outlines anumber of disabilities that prevent organizations from learning, and he identifies disciplines that can help organizations to become more enduring. Do these
disciplines and disabilities reflect the values inherent in English-speaking democracies, as outlined by Hampden-Turner and Trompenaars? To answer thisquestion, let’s begin by reviewing the disabilities Senge outlined, rewording
them to reflect the Parsonian values they embody: The enemy is out there—When encountering a problem, people neglect toconsider how it may be a function of the diffuse relationship of which they
are a part. They look instead for a specific individual upon whom blame
can be laid.
 Fixation on events—Managers focus attention on dealing with specific,
highly visible events, neglecting how those events might be consideredpart of a diffuse, multidimensional pattern.
 The parable of the boiled frog: People ignore diffuse, slow-building phenomena until they generate specific, measurable symptoms that can act
as the focus of attention.
 I am my position—People assume that the roles they play within organizations are one dimensional, and that they can perform only within theconfines of the specific role for which they were employed. They treat
roles as universal, so that, for example, they consider all marketing people
the same, rather than looking for the particular contribution a person
might make to the organization.
 The myth of the management team—While people may use terms thatsuggest executives will act as a collective, they expect that the executives
will really act as individuals focusing on their self-interest ahead of the interests of the whole organization.
 The illusion of taking charge—By proactively attempting to achieve performance improvements as indicated by specific measures, managers do
not take into account the unintended consequences of their actions on diffuse, less easily measured aspects of organizational health.
 The delusion of learning from experience—People ignore negative effects that
their actions might have on individuals in other parts of the organization,
because they see each part as separate from the other and concern for thecommunity as a whole might impair the achievement of the individual’s personal objectives. Even where some individuals can see lessons to be learned
from experience, because people do not talk together as a community, theycannot explore how they might act collectively to apply these lessons.
In each case, the disability can be framed as an over-expression of cultural values. While universalism, analysis, individualism, and achievement are not badin themselves, as Barry Johnson (1995) says, there is no tool yet invented thatcannot be overused. The disabilities give evidence that organizations in English-speaking democracies in particular have overused these values and neglected the need that has been created for particularism, integration,

REFLECTIONS, Volume 3, Number 1

Alain GauthierExecutive Director
Core Leadership Development

Commentaryby Alain GauthierPhil Ramsey’s insightful article is a reminderthat culture is a collection of differences. His
use of Talcott Parsons’s pairs of complementary values provides a simple yet powerfullens for understanding the ever-evolving
challenges in creating learning communities.
As a consultant and educator, I have endeavored to assist in building learning organizations both in Europe and in the UnitedStates during the past 12 years. In my experience of overseeing and adapting the
French translations of The Fifth Discipline,
The Fifth Discipline Fieldbook, and The
Dance of Change, I realized how culturally
specific the application of the five disciplines needs to be. In contrast to the American culture, the French often engage
emotionally with one another, especiallywhen they advocate, and tend to look atcomplexity and relationships in a more diffuse way. They are ideologically universalistic, but particularistic in practice. They
award status on the basis of school reputation rather than achievement, and often use
the collective to avoid individual accountability. Consequently, the diversity of mental
models for the French is taken for granted;
shared vision is talked about but seldom actualized; team learning is accepted, but reluctantly so; systems thinking is embraced
intellectually but rarely practiced, and personal mastery is often perceived as an intrusion in one’s private life. These types ofresistance might well apply to other Latincountries.
There are, of course, notable exceptions
among French companies, including corporate
members of SoL France. But organizational
learning “à la Peter Senge” has not yet taken
hold in French society much beyond the intellectual curiosity it has aroused. For example,
the interest in “objectifying” tools—such assystems archetypes, simulation models, andorganizational assessment grids—reveals the53

RAMSEY
Learning to Be Complete

54

French propensity to address issues rationallyrather than as an opportunity to challenge
one’s habitual ways of thinking, behaving, andbeing. Learning is viewed as transactionalrather than transformational.
Although the complexity of a culture cannot be reduced to five sets of complementary values—generalizations usually do not
apply to a small, active minority—it is fair tosay that the French cultural immune systemhas, so far, thwarted attempts to introduce
an Anglo-Saxon approach to organizational
learning. This is one reason why SoL France
and other European SoL fractals haveadapted capacity-building courses and initiated projects to deal more productively withthese culturally specific forms of resistance.
In conclusion, Ramsey’s distinctions andobservations will be invaluable in our growing understanding of the conditions needed
for learning to be complete and for deep
cultural change to take place in different
parts of the world.

community, and ascription. Is there a correspondence between the neglectedvalues and the disciplines promoted in The Fifth Discipline? Let’s consider eachin turn, again rewording them to highlight the Parsonian values involved:
 Mental models—Rather than act as if there was a universally correct wayof understanding the world or the things in it, people should learn to appreciate that someone’s understanding depends on the particular model
he or she is using. And rather than assuming that group cohesion depends
on everyone accepting one specific model as a standard, a community will
be healthier if it learns to value its members’ diversity of perspectives,
even though this is a messier, more diffuse way of looking at the world.
 Shared vision—People intrinsically desire to be part of a community working toward an emotionally engaging, shared purpose. Despite this, manyorganizations rely on motivating individuals with extrinsically oriented reward systems and competition between organization members. Whileemotionally neutral extrinsic rewards allow managers some control overthe specific behaviors of people seeking to achieve outcomes determinedby the organization’s executive, they undermine social bonds that hold thecommunity together. So, rather than award people status on the basis of
specific achievements, organizations can build community by ascribing
status to people based on their commitment to shared vision, even thoughboth the status and the basis for it are more diffuse.
 Team learning—Complex organizational problems require solutions that
integrate the knowledge of a variety of people. Many organizations
struggle to achieve integration because individuals have difficulty openly
sharing knowledge in a collective way. The capacities needed for people
to work and learn together in teams are diffuse—“soft” issues such as relationships and intentions—rather than specific skills and competencies
more accessible to “hard” measurement.
 Systems thinking—Because organizations are complex systems, actions
designed to achieve specific outcomes often have a diffuse impact, with
unintended consequences occurring far—in both physical and temporal
distance—from the expected target. Complex systems are better understood using integrative rather than analytical thinking.
 Personal mastery—In order for a community to act together in the integrative way needed to bring about progress toward shared vision, people
need to master the creative process. If people cannot handle the tension
involved in creating, they slide into a pattern of reacting to pressures oropportunities on the basis of specific events. Such reactivity by individuals undermines social bonds.
Commentators like Russell Ackoff (1997) have pointed out that the heavyemphasis on analytical thinking in Western nations provides a backdrop to theneed for systems thinking. Exploring all of the values characterizing English-speaking nations in particular gives aneven clearer context for the full range of disciplines making
up the learning organization. I could summarize by sayingthat a learning organization is the sort of place in which wewould all like to work (Kofman and Senge, 1993), because
it allows for the expression of a full range of complementary values, and that currently the need in English-speaking
nations is for greater expression of values of particularism, community, integration, ascription, and emotional engagement. But what implications does a cultural analysis have for those seeking to create learning communities?

But what implications does a cultural
analysis have for those seeking tocreate learning communities?

Cultural Pitfalls
If becoming a learning organization involves ensuring that previously neglectedvalues become fully represented in organizations, then people interested in cre-Volume 3, Number 1, REFLECTIONS Universal goals—Values of universalism and analysis may encourage us tobelieve that we should be able to create a model of what a learning organization should look like. This model would allow us to take specific measures as a diagnosis of what needs to be done, leading to prescriptions of
the specific steps we need to take. We might also assume that the actions
or activities needed are universal, whether organizations are in the US,
France, New Zealand, or Chile.
 Standardized visions—Because of their unconscious reliance on universalism, some organizations create vision statements by following a leading
company’s formula. They may assume that there is a universally best statement that is motivating in itself, rather than seeing shared vision as a way a
community can clarify the particular identity that sets it apart from others.
 Approaches to learning—Organizations may set about learning in waysthat reinforce existing values. For instance, they may seek to have people
learn about conversations by having them individually analyze their current practices in an emotionally neutral manner, comparing them with auniversal model of how conversation should be conducted. Similarly, approaches to systems thinking may overemphasize development of emotionally neutral models in which variables are carefully analyzed andspecifically stated.
 Overreliance on performance management—Many organizations havehighly developed performance management systems (PMS) that enable
them to organize work so that individuals commit themselves to achieving

REFLECTIONS, Volume 3, Number 1

RAMSEY
Learning to Be Complete

ating a learning community have taken on a culturalchange project. They are seeking to bring about changes
that will conflict with basic assumptions held by membersof the organizational community. Two cultural dynamics
that are likely to present themselves are schismogenesis
and the tendency for people to revert unintentionally to thevalues they are seeking to change.
We have already considered the way in which
schismogenesis operates to polarize people and groups
around opposing values. Living in what has been described
as an “argument culture” (Tannen, 1999), many people
might assume that the way to bring about change is to advocate their position vigorously while showing others whyor how their assumptions are flawed. This example of linear thinking encourages change agents to respond to resistance with greater and greater force. It is counterintuitive to
people operating from these assumptions that schismogenetic processes limit the effectiveness of their advocacy.
Indeed, the greater the force they use to advocate a shift invalues, the more they mobilize forces determined to retain
existing values. An argument for change creates an escalating conflict in which the existing culture has an established, strong position. Change agents thus need to guard
against representing existing values as problems to besolved by organizational learning techniques. Rather, theyneed to seek “both/and” ways of understanding issues, appreciating that if existing “disabled” ways of thinking had
no value, people would not be using them.
The second cultural challenge involves dealing withpeople or groups who want to change. The unconscious
nature of people’s assumptions will likely lead them into
activities that unintentionally reinforce existing values rather than promoting
the missing values the organization needs. Consider the values involved insome common practices you may have observed:© Emily Sper55

RAMSEY
Learning to Be Complete

specific outcomes. Success of these systems in conjunction with existingvalues may lead managers to think that they can use PMS universally, that
is, as the way to bring about all change. This can lead to the paradoxicalsituation in which people are asked to pursue individual objectives to dowith improving teamwork, as if the nature of teams resided within individuals rather than relationships.
 Self-interested personal mastery—Practices of personal mastery can be used
for the benefit of individuals or for the benefit of the community as a whole.
Within an individualistic macroculture, people may assume that their organizations will automatically be better off if they use the creative process topursue their personal opportunities and desires, unaware of any damaging
effects this may have on the organizational community as a whole.
The workings of culture provide an underlying structure that naturally leads to thesorts of paradox and confusion outlined above. For those seeking to create learning communities, an understanding of values and culture provides an insight into
how organizations unconsciously hamper their own efforts to generate change. A
challenge for change agents in particular is to become conscious of that which
they take for granted, to recognize how these assumptions shape their practice,and to explore approaches to change that utilize a wider range of values.
In summary, cultural processes have a significant impact on learning
within organizations. When cultures form, values are established that promotelearning in some areas, while creating blind spots to learning needs in complementary fields. This process can be observed within organizations and industries such as aviation. It can also be seen in the culture of Western businessmore broadly. Processes of schismogenesis in this context have created theneed for values represented within learning organizations. In addressing thisneed, however, practitioners must respect and understand cultural processes,or they risk contributing to further splitting apart complementary values. The
challenge of complementarity is for organizations to learn to be complete.

References

56

Ackoff, R. From Mechanistic to Social Systemic Thinking (Waltham, MA: Pegasus Communications, 1997).
Bateson, G. Steps to an Ecology of Mind (New York: Ballantine Books, 1974).
Bower, M. The Will to Manage (New York: McGraw-Hill, 1966).
Hampden-Turner, C. Creating Corporate Culture: from Discord to Harmony (Reading, MA:
Addison-Wesley, 1990).
Hampden-Turner, C. and F. Trompenaars. The Seven Cultures of Capitalism (London:
Piatkus, 1993).
Helmreich, R. and C. Foushee. “Why Crew Resource Management?” in Cockpit Resource
Management, eds. E. Weiner, B. Kanki, and R. Helmreich (San Diego, CA: Academic
Press Inc., 1993): 3–45.
Kofman, F. and P. Senge. “Communities of Commitment: The Heart of Learning Organizations.” Organizational Dynamics 22 (Autumn 1993): 5–23.
Johnson, B. “Capitalizing on Resistance to Change through Polarity Management” (Presentation to Asian Region Training and Development Organization Conference,
Melbourne, Australia, July 1995).
Nance, J. Blind Trust: How Deregulation Has Jeopardized Airline Safety and What You
Can Do about It (New York: Morrow, 1986).
O’Hare, D. and S. Roscoe. Flightdeck Performance: The Human Factor (Ames, IA: Iowa
State University Press, 1990).
Parsons, T. The Social System (New York: Free Press, 1951).
Senge, P. The Fifth Discipline (New York: Doubleday Currency, 1990).
Tannen, D. The Argument Culture (New York: Random House, 1999).

Volume 3, Number 1, REFLECTIONSFour Futures for Organizing
and Leading in the New
EconomyFEATUREArt Kleiner

Preface by Adam Kahane
Here Art Kleiner reports the results of a workshop I led in May 2000, the purpose of which
was to think about the future of organizing and leading, and thereby to inform conversations about strategy in the Society for Organizational Learning (SoL) community.1 Ariede Geus, formerly Royal Dutch/Shell Group Planning Coordinator, suggested that we use
scenario thinking, an approach that has been pioneered at Shell since the early 1970s(Wack, 1985a, 1985b; de Geus, 1988, 1997; van der Heijden, 1996). In the late 1980s andearly 1990s, I apprenticed in and then led part of the Shell team, and since then havefurther developed the methodology with my Generon colleagues, in both corporate andcivic settings (Kahane, 2001).
Scenarios are stories about how the world might unfold. By playing out multiple
narratives about the future, they help us see and understand more of what is happeningaround us and hence increase our capacity to adapt to the world and also to shape it. In
order to be useful in this way, the scenarios must meet four criteria:

Art Kleiner
Writer, scenario planner Relevance: The scenarios have to deal with aspects of the world that matter to us
or, in other words, be connected to our current mental models.
 Emergence: The scenarios have to deal with aspects of the world that are not yet visible to us (not on our radar screens) or, in other words, to challenge our mental
models. Note that this criterion is in tension with the first one.
 Plausibility: We have to be able to believe that these futures could occur, to takethese stories seriously enough to be willing to play with them.
 Clarity: We have to be able to understand, communicate, and remember the stories.
The four stories developed in the workshop more or less meet these criteria, as well as
they could in only two days of discussions. They are not scenarios about SoL itself but
rather about possible contexts in which all of us—SoL members and others—might findourselves over the next decade. We offer them here as a tool that we can use to improve
the quality of our strategic thinking and acting.
The process of making and using scenarios involves a cycle of four activities.

57

Adam Kahane
Founding Partner
Generon Consulting

1. Identify the Strategic Agenda
In order to study the world usefully, we need a “strategic agenda,” a starting point forour inquiry and learning, and an initial area of focus—although we may end up paying
attention to a very different area. Usually, we elicit this agenda through interviews withclient leaders. In the case of this project—and in other, civic projects—the scenario teammembers, chosen for their interest in SoL’s work as well as their distance from it, defined
the strategic agenda themselves, based on their own areas of curiosity and concern. In

REFLECTIONS, Volume 3, Number 1© 2001 by the Society for Organizational Learning and the Massachusetts Institute of Technology.

KLEINER
Four Futures for Organizing and Leading in the New Economythis way, they provided the SoL community with an “outside in” perspective on the environment in which it would need to evolve.

2. Study the System
The core of scenario work is trying to understand what is going on in the world, exploringoutward from the strategic agenda’s initial area of focus. Of course, this task is infinite andtherefore never fully achievable, so we do the best we can within the time and resources wehave. We are trying to go beyond seeing events to seeing underlying patterns and structures.
In addition to traditional methods of analysis and synthesis—reading, talking with experts,
modeling, and so on—one excellent method for seeing more of what is going on is “learning journeys”: getting out of our normal environments and deliberately putting ourselves in
unfamiliar contexts and in dialogue with people who see the world from other perspectives.
In the workshop, this approach was approximated by bringing together a group of such “remarkable persons” with a wide range of perspectives: consultants to Internet startups, religious leaders, business school academics, writers and artists, community activists, Fortune
500 executives, venture capitalists, environmentalists, health care entrepreneurs, and so on.

3. Construct Scenarios
Scenario stories are simply a natural, elegant way of summarizing our learning about how
the system we are studying is unfolding. Scenarios can be seen as images of the possible
futures or as alternative interpretations of the present. In this workshop, the team used
the “inductive” scenario method: Moving from our strategic agenda of concerns and curiosities,
 To brainstorming possible “snippets” of possible futures,
 To clustering the snippets into scenario “families,” To choosing four useful scenarios,
 To developing each scenario as a narrative over time, To illustrating each scenario with vignettes of people’s lives in that story,
 And finally to drawing implications for leading and organizing, and for ourselves.

4. Use the Scenarios to Address the Strategic Agenda

58

The purpose of scenario work is not to construct scenarios for their own sake but, rather,through making and using the stories, to improve the quality of strategic thinking. The
workshop participants and SoL members have already used these scenarios in their annual meeting, trustees meetings, research meetings, and other settings. The key to using
scenarios is to ask yourself two sets of questions.
 First, consider one scenario at a time and, for each one, ask: If I assume that this
scenario was in fact occurring, what would it mean for me, my family, my work, myorganization, my community? What opportunities and threats would I face? Whatwould show up as my strengths and weaknesses? How well would the strategy I am
now pursuing—explicitly or implicitly—work?
 Next, consider all four scenarios as a set, not knowing which one will in fact occur,
and ask: What excites me and frightens me in these possible futures? What do I want
to help bring forth and what do I want to help prevent? How is the strategy I am now
pursuing helping to ring one or another forth? What will I do now?
Try out these questions to see if the scenarios are useful to you.
B
There is nothing as boring as someone else’s scenario of the future. That’s why thefour stories you are about to read should be seen only as starting points—an opening
from which to think carefully about our common future as co-organizers, business leaders, consultants, researchers, and, most importantly, people who must make their way
in an increasingly complex world.

Volume 3, Number 1, REFLECTIONSKLEINER
Four Futures for Organizing and Leading in the New EconomyGiven this complexity, how can we better know the potential impact of our decisions? How can we choose whether to keep or change jobs, whether to give our time toone endeavor or another, whether to settle in one place or another, what kinds of longterm organizational decisions to make (to set ourselves up for better short-term organizational decisions), and what sort of life to try to create for ourselves and our families?
These four futures themselves probably won’t come true, but they represent flavorsof events and trends that will, almost certainly, influence our futures. By giving names
to these flavors, we pick up a handle with which to talk about our future. Yet these are
not just extrapolations of current trends. Each describes a kind of threshold that theworld must cross, a boundary to a different way of life: Techno-Gods—The inexorable march of machine (and bio-machine) progress takes
humanity across yet another technological threshold, into a significantly accelerated
post-industrial environment.
 Corporate Gatekeepers—Spurred by globalizing, merging corporations, and increasingly uncertain governments, the world crosses a threshold of political organization,
dominated by a few large corporate-governmental entities that seek what managers
everywhere seek—control over uncertainties.
 New Renaissance—Western and Eastern societies cross a threshold of values awareness leading to a “new renaissance” that includes new institutional practices and areformation in ways of living (a future with its own unique challenges).
 Virus World—The industrialized and developing worlds both cross a kind of “boiledfrog” threshold of decline, in which every debilitating factor acts with the seeping
decay of viral infection.

Scenario 1: Techno-Gods

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59© Karen Ayas

“We are as Gods,” wrote Stewart Brand when he created theWhole Earth Catalog, “and we might as well get good at it”(Brand, 1968). In this scenario, humanity takes this statement literally, but doesn’t necessarily get good at it. Technological advance continues at its most accelerated
plausible speed, but human values and governance structures muddle along, trying to catch up. The threshold thatgets crossed is partly technological and partly spiritual. But
it is a threshold of power. (The scenario group originallycalled this future, Omnipotent Techno-Gods.) The awarenessthat we can be as gods changes the human spirit in a tangible, qualitative (and not necessarily benign) way.
It is the year 2010, and people are plugged in as neverbefore. The “noosphere” that Teilhard de Chardin foresaw is now a “noose-sphere” of sorts, in the sense that
there is no escape from it (de Chardin, 1925). Culture is
global; indigenous people in, say, remote parts of the
Amazon are as plugged in as everyone else. This meansthat opportunity and economic growth are rampant
throughout the former “developing” world, with a resulting increase in anxiety among the former industrialized
nations. People are glutted with information and advertising that is targeted at them, appearing everywherefrom the street signs by their homes (“Good morning,
Betsy. The grocer down the street has a special on thekind of cereal you like”), to the inside rim of their eyeglasses, to the voice-chip in their automobiles. This is ahigh-touch future as well, at least for the affluent, with afast-moving, fun-filled economy (but lots of nervous
breakdowns and invisible, hidden, burnout cases). Children graduate from Ritalin to Ecstasy as a matter ofKLEINER
Four Futures for Organizing and Leading in the New Economy

60

course; companies devolve and reform continually; people “own” their jobs, a statethat often resembles indentured servitude.
As a parent of a five-year-old, you might make an IPO with his or her life to raisemoney for college (but lord help you if your parents bet on a loser). In short, this is a
future of winners and losers, fueled with such manic, fast-paced change that the losers
continually get another chance . . . and another . . . and another . . . without muchthought for consequences. Few people question the values of this world, or the places it
is going, in any meaningful way, because there is simply no time to reflect and take stock.

How We Got to Techno-Gods
In the early years of the twenty-first century, the enormous wealth created by the“Internet surge” propelled a second technological boom. The speed, reach, and low costof the global electronic network, already remarkable in 2000, now accelerated, until it
engulfed all human activity. Innovation proceeded haphazardly, but the speed of innovative cycles was so fast that, in many fields, including biotechnology, nanotechnology, andthe evolution of computers, it was impossible to govern (or even be aware of) the impactsof new machines. The net, in effect, became not just an index to all human life, but amedium through which businesses, and individuals, redefined themselves. Intelligent email filters represented the first emergent technological omniscience, that has evolved by2010 to a global network that itself seems almost sentient.
Even by 2000, it was clear that the Internet bubble would burst, but the inevitableconsolidation did not mean a slowdown in technology. Instead, the “dot.com shake-out”
of 2003 reframed the corporate environment, eliminating many old dinosaurs and replacing them with new, more resilient corporate mammals. Surplus investment capital, theinfluence of the new techno-billionaires, and seemingly infinite varieties of new technology continually spurred each other to new levels.
This occurred at the same time as an increasing individual search for release fromboredom and spiritual meaning—in the workplace and elsewhere. By the standards of the
1990s, spirituality seemed oddly detached from old, gravity-bound concepts (like “family”
and “community”), but all the more compelling in that vacuum. The “winner takes all”
economy was flush enough that even the “losers” were included. Indeed, they could
hardly escape. Culture inexorably moved to a kind of interactive “lowest common denominator” ambience, as if there were 100,000 channels of consciousness, all broadcasting
variations on the same message (and increasingly in the same few “net savvy” languages).
By 2009, the advance of technology had led to high levels of artificial intelligenceembedded in an increasingly electronic urban environment. People were connected,
through body implants and day-to-day performance, in ways that even the artists of the
1990s had not quite imagined.

Notable Implications of Techno-Gods
The most interesting interrelationship, perhaps, is between technological growth andspiritual need. We are as Gods, and we need God more than ever. This is a world of emotional and spiritual vulnerability, precisely because human capabilities for community areless exercised (even online communities are often fragmented and narrow). Cults are
more popular in this future than in any of the others, even Virus World.
This is also the future of greatest economic boom. Omnipotence, as one participant
noted, starts with wealth. To the extent it comes to pass, it will substantiate the theory
that unfettered markets create wealth. There may be rolling crashes and shortages here,
but they are quickly forgotten in the perpetual wave of oscillation. If the world is heading for a crash and depression, it hasn’t hit by 2010. And the economy seems to keep
rolling without much external control.
Indeed, there was almost no government mentioned in any comment about this scenario. Presumably, big governments still exist, but they have devolved largely to the status of entertainment, perhaps with electronic voting beginning to replace many of thelegislative functions of 2000.

Volume 3, Number 1, REFLECTIONSIf you have faith in human nature,[Techno-Gods] is not such a bad
future, because the ineffable spirit ofhumanity can prevail against
anything.

KLEINER
Four Futures for Organizing and Leading in the New Economy

This future was inspired in part by an article by Bill Joy in Wired suggesting thedangers of technological evolution (Joy, 2000). But we gradually realized that technological change will be neither blessing nor disaster, but an unprecedented mix. Mindlessness
will be rampant, and so will greed; but the aspiration to do better things is unchecked,
and people believe anything is possible. The paucity, here, is truly in the imaginationsof the individuals. Philanthropy, in this future, is a strong source of seed money for social change, and the “have-nots” are increasingly sought after to become “haves” (wherethey, too, can come online and help keep the economy going).
The notion of indentured service emerged in this future. When machines control, human autonomy is worth less. People indenture themselves to enter the plugged-in world.
Because machines act as a force for decentralization, this future belongs to the customers
and employees, not to the bosses. As C.K. Prahalad noted, the question, “What does it taketo be a good follower?” becomes very profound in an environment where many employees
are effectively volunteers, with a near infinite number of employment choices.
If you have faith in human nature, this is not such a bad
future, because the ineffable spirit of humanity can prevail
against anything. But if you mistrust human ability to combat machine-age assumptions, boredom, addiction, and thecontinual search for the new adrenaline rush, then this future represents a discomfiting place to live, and perhaps atense environment for SoL. “The Techno-God is a very impatient God,” said one participant.
Finally, this future is (on some level) predetermined.
It will happen, in some form, unless something specific isdone to block or deflect it. There is so much short-term
comfort and wealth generation in the trends leading to this future, that many people will
ignore the long-term implications. Will we have the ability to cope?

Scenario 2: Corporate Gatekeepers“We were originally going to call this Off to See the Wizard,” said one of the people who
developed it, “but we realized it really wasn’t the Yellow Brick Road. It was Goodbye,
Yellow Brick Road that we were predicting.” Later we changed the name to Corporate
Gatekeepers to focus attention on the central factor of this future: A world in which corporations seek (or are drawn into) control not just over their private goals but over the
public sphere as well, becoming in effect the “gatekeepers” of a quality civic life.
In this future, Kenichi Ohmae’s “borderless world” has become more of a reality, as
corporations override not just local tariffs, but local regulations (Ohmae, 1990). Investment capital and corporate activity move freely across national borders. Antitrust laws
are redefined. A global representative government has in effect replaced the United Nations. It is elected by boards of corporations, which in turn represent shareholders (including employees and retirees who own stock through their pension funds and voteaccordingly).
Only a dozen or so major companies divide the world among themselves. Many regions or nationalities have reconstituted themselves as “gated nations,” in which a few
companies dominate employment and trade. These companies have more power thancountries. The barrier to entry for new organizations is high, at least once they reach acertain level of growth. There are three major organizations permitted per sector.
Social stratification is high. Social engineering is accepted and managed by either
companies or countries. Exhausted by turmoil, people love the lack of stress and the
comfortable way that decisions are made for them once they join a corporate lifestyle.
People wear corporate logo-emblazoned jewelry to show that they belong.
The world is a meritocracy. Institutionalized education is seen as the path to a controlled career. The market is unfettered, but, paradoxically, the amount of control needed
to survive and thrive is perceived as greater than it has ever been. Eccentrics andindigents retreat to enclaves outside the mainstream (where, presumably, they are idealized as the source of cultural soulfulness).

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KLEINER
Four Futures for Organizing and Leading in the New Economy

How We Got to Corporate Gatekeepers© Emily Sper62

In 2001, after Microsoft finally defeated the Department of Justice judgment and prevented
the breakup of the company, after cyberterrorism scares became commonplace, and after
the Internet bubble threatened to burst, groups of global business and government leadersbegan to meet in more intensive sessions, focused on the subject of organizational security. Since these meetings no longer took place in the United States and rarely included
more than one US competitor, antitrust was no longer seen as an issue. The meetings represented a prelude for a new kind of merger mania: strategic mergers, focused not just on
maintaining shareholder value but on wresting back control over the unruly market, in a
way that democracy could not.
At the same time, in the aftermath of the 2000 presidential election, people grew
fully disenchanted with national leadership. “They’re just pre-bought corporate lackeys,”
was the view of the person in the street—even the corporate person! After the final defeat of campaign finance reform, John McCain accepted an ambassadorship to the Cayman Islands. The US Secretary of Commerce, by 2004, was officially appointed by The
Business Roundtable.
Business leaders no longer pitted themselves against government; even in Europe,
they and government now saw themselves on the same side. Government existed to create wealth and thus to develop a better standard of living for people. Departments andMinistries of Commerce were soon run by pro-business appointees; industries like banking, which once had been closely regulated, now cannot be regulated. Banks, for instance, became obsolete as General Electric, Ford, and other companies consolidated
their presence in the credit business.
The threshold was crossed around 2006, with the evolution of “monster mergers.”
Historically, the Time Warner/AOL merger of 1999, which had proven remarkably successful, was now seen as the first of its kind. Within six months, the boards of Oracle,
Dupont, General Motors, SASOL, SAS, and Ciba-Geigy had voted to combine their governance structures. Combined with the capabilities of the Internet, the mergers became
vehicles for massive redesigns of massive companies, but they created so many opportunities for contractors, dealing with outsourced work, that few displaced employees
were permanently removed.
In 2004, atmospheric scientists confirmed that the increased presence of carbon in
the atmosphere had indeed led to more turbulent weather. This was underlined in 2008
when several earthquakes took place on the San Andreas Fault in California between
October and December. The last of these created a fissure deep enough to divide thewestern half of the state from the Sierras, and California became an island. Similar natural disasters were occurring throughout the rest of the world.
Humanity looked for safety where it could find it—in the largest corporations. Manynation-state governments, returning to a sense of vulnerability that they hadn’t felt for 400
years, became virtual fiefdoms of corporate interest: connected by the Internet, they
hooked up with one or more of the new global keiretsu. Instead of “company towns,” there
were now “company regions,” where everyone involved worked for the same global enterprise, for one of its suppliers, or for a business that catered to its employees. Microsoft administered the regional
government of Seattle-Vancouver, beginning in 2010.
Corporate control, as a cultural value, increased
throughout the 2000s, but there is always an undertow tosuch movements. Local communities sometimes secededfrom the global net, building their own identities based onalternative products, local “sweat equity” currency, andcooperative investment. Some are led by survivalists, left
over from the 1980s, who opt out of the corporate
economy altogether, and isolate themselves in remoteparts of the Urals, Rockies, Andes, Himalayas, orPyrennes. Others represent a subculture of makers whocluster around artists and artists’ colonies in inner cities(and suburbs) as ways to build alternative communities

Volume 3, Number 1, REFLECTIONS

Notable Implications of Corporate Gatekeepers

Corporate Gatekeepers will probably
be most plausible if you believe thathuman beings are sociobiologically
fixed.

In Systems of Survival, Jane Jacobs proposes that themindset of government (the soldier) and the mindset ofthe market (the merchant) are fundamentally incompatible. In this scenario, they merge—and prove her wrong(Jacobs, 1992).
In my opinion, our group’s imagination did not rise to
the task of developing this future. We are so conditioned
by our image of the 1950s American world of corporate
control—the world of the “organization man” and “the man in the grey flannel suit”—
that we can’t help but extrapolate from there. Or perhaps we are extrapolating from ourexperiences in the corporate world in the eighties and nineties. But the future of Corporate Gatekeepers will probably be somewhat different in tone and style, and similar onlyin underlying structure. For example, do we really mean to suggest that there are only ahandful of organizations around the world? Is that plausible? Or is it more plausible that
there are only a handful of corporate constellations, in which all the organizations migrate to one “central body” or another?
For example, one group talked about the rebirth of the courtesan: “the return of thefemale into the decision-making environment and the number of senior male executives
who have female executive coaches.” Sexuality and being a “thinking partner” would be
inextricably linked. Reading this over, I realized that Corporate Gatekeepers will probably
be most plausible if you believe that human beings are sociobiologically fixed, that our
habits run in patterns that we inherited from our chimpanzee-like ancestors, and that wewill always run in packs and look for the dominance of “alpha males.” If you ascribe tothat theory of human nature (whether you like it or not), then this future will make sense
to you (whether you like it or hate it).
The social responsibility of corporations takes on greatest significance in this future,
because with their new social role comes increased responsibility. This is the future
Willis Harman foresaw, and the future to which he responded (Kleiner, 1996).
Several people noted that this scenario, even more than Techno-Gods, assumes thatgreed and self-interest will trump all other emotions. This is the future that evolves froma world in which young managers routinely leave high-paying positions to take better
offers, without any concern for loyalty. Paradoxically, that leads to an increased drive forloyalty, but on new terms.
The “new Europe”—not just the economic and political underpinnings of the euro
and European Union, but the cultural shift they engender—is critical to this scenario taking place. We started talking in a circle about Europe: What if this new Europe actuallyfunctions with an economics of forgiveness? We have an opportunity to have an economy
of forgiveness and an economy of sharing. Instead we have an economy of greed and an
economy of giving. Similar things happen in Asia, South America, and even Africa.
The boundary between “art” and “commercial” is inextricably blurred. Advertising
writers are revered as auteurs. Art is not separate from life; it is a specialty. “I was on a
job about two weeks ago,” Betty Alexander, the graphic scribe, told the group. “Someone
came up to me and said, ‘Aren’t you just so delighted that people recognize you as an artist?’ I said, ‘I don’t think of myself as an artist. I think of myself as a person who brings a

REFLECTIONS, Volume 3, Number 1

KLEINER
Four Futures for Organizing and Leading in the New Economy

that aren’t dependent on this land of Oz. As they become more dependent on each other,
they develop their own set of local shared values. These are communities of value, notcommunities of economy; and they’re very clear that their values aren’t corporate. They
become highly attractive as alternatives to young people and to retiring baby boomers,
because they have a spiritual basis for association.
These local communities begin to generate an alternative economy based on craft
production. They have little capital, but lots of sweat equity and skill. Using the Internet,
they make “what the customer wants” when the customer wants it, with a personal relationship included. As a consumer, you can get to know the person who’s making it foryou. The most successful of these communities, however, gets so big that corporate/government interests could buy them out.

63

KLEINER
Four Futures for Organizing and Leading in the New Economy© Betty Alexander

Implications for individuals

lot to a situation, and art is one of the things I bring.’ To be slotted into the box of an ‘artist’ disturbed me.” In a paradoxical way, again, corporate control allows room for this kindof “un-boxing” to take place.
Despite the Internet, despite the borderless world, geography is still relevant here.
People are marked by where they live. (Is that plausible?)
Finally, I thought it was interesting that, of the five individual stories told for this
scenario, four were from outsiders (one was told by a terrorist!) and the fifth seemed
profoundly unhappy. Contrast that to Techno-Gods, where the participants all seemed
involved with the mainstream and curious about what was going to happen next.

Scenario 3: New Renaissance64

This is a scenario of a plausible awakening of conscience and consciousness, both global
and local. (The scenario group originally called this future, We Wake Up.) It occurs in a
way that leads to a fundamental realignment of corporate and civic structures, in the service of a sustainable future.
The principal premise of The Fifth Discipline Fieldbook is: “Every organization is the
product of the way its members think and interact. Change the way people think and interact, and you can change the world” (Senge et al., 1994). In this future, that turns out
to be correct, and people manage to change the fabric of life accordingly. The idea thattechnology is a panacea loses currency (perhaps because of a visible technological calamity?). It becomes accepted that human beings are more than analytical creatures; weare whole beings. Boundaries are blurred between business, government, and civil organizations, but not in the service of control (as in Corporate Gatekeepers). Instead,people accept a life of less control (or no control) because they realize how illusory theirefforts at control were all along.
Or, as Jon Kabat-Zinn (founder of the Center for Mindfulness in Medicine, HealthCare, and Society) put it, “Many people carry around the model that we are really just a
machine. An enzyme is a self-assembling unit that can actually do work. The molecularbiology of the cell is extremely efficient nanotechnology.” But in this future, that reductionist view of humanity no longer persuades. Instead, people believe that the body is an

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Implications for self-expression, leading, and organizing

integrated part of the whole person, just as “the economy is a wholly-owned subsidiaryof the ecology” (according to economist Herman Daly, quoted by Sarah Severn, Nike’s
Director of Corporate Responsibility).
The New Renaissance scenario is ignited, both in this workshop and perhaps in reality, by a view of medical care as an aspect of personal growth and transformation. The
same is true of financial care. For example, philanthropy becomes a part of the well-lived
life. Instead of working through large foundations, people give money in ways that allow for a sustainable relationship with the project that is funded. There is generally areconnection with spirituality, a stress on quality instead of quantity, and more efficiency
and creativity in the use of natural resources. There may be a return to voluntary simplicity, especially in the face of complex electronic media.
Finally, there is a significant blurring of the traditional boundaries between government and business and civic organizations, where roles suddenly begin to be intermixed and integration and different kinds of partnering become the rule rather than the
exception.

How We Got to New Renaissance
The signs were already evident in 1999 or 2000, but few people were paying attention,in part because of the local nature of so much activity. It was hard to see the full shiftuntil it happened worldwide. Material things no longer seemed to matter much. Hydrogen fuel cell-driven automobiles and vehicles rapidly became popular once the technology emerged. The course of environmental destruction weighed heavily on people’s
minds. And with economic success available to so many people, we were looking for a
way to sustain civilization, not just to grow it. Of course, we were also looking for anantidote to our stress-filled, fast-paced, enervated lives.
The children made the difference. They started to hold conferences to transformmoribund schools. They organized themselves over the Internet, on behalf of environmental change. They started pooling money to buy corporate shares, not just for the investment rewards, but to try to influence the companies. They wanted a voice in theworld, and they wanted a better world.

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This brought grace and gumption to the people who were already seeking a betterworld. Global advocacy groups, including environmentalists and labor groups, found anincreasing constituency inside and outside corporate walls. In general, corruption diminished, because (in an Internet-driven world) it was harder to make it pay. Medical
breakthroughs showed the advantage of healing in a way that recognized the interdependence of mind, body, and spirit. Meditation became common. School curricula, by
the mid-2000s, included art, music, and even spirituality.
Around 2003, health management organizations (HMOs) and many government
health-care systems collapsed. Only those with an orientation toward preventative caresurvived, because the rest accomplished little except diverting money from one set of
pockets to another.
Ted Turner’s gift of $1 billion to the United Nations turned out to be more significant than he had thought. It set the stage for a series of individuals and philanthropists
to reinvent philanthropy based on “emotional intelligence.” A group of Silicon Valley
executives, calling themselves the New Renaissance, emerged from the Social Venture
Network. They modeled themselves on the Medicis and asked, “What could we do together to foster another renaissance, to honor the sacred and the secular, and to bridge
past the industrial ethic on a global scale?”
The Internet helped dispel the idea that an automobile was crucial to success, but it
was followed by a renewed emphasis on transportation and power infrastructure, thistime in a sustainable way, bolstered by energy sources like fuel cells and photovoltaics,
as well as a renewed emphasis on energy efficiency. UN Secretary General Amory Lovins
set the tone for the new era in 2009 in his inaugural address. But most of the action did
not take place at the global level. Microcredit-funded small enterprises, particularly those
operated by women, reached critical mass throughout the formerly “developing” world,which soon seemed like it would leapfrog past industrial society. And industrial society
was doing its own leapfrogging. There was a lot of work to do, but a spirit of optimism
and joy that hadn’t been taken seriously since, perhaps, a group of Broadway actors trodon stage singing “The Age of Aquarius.”

Notable Implications of New Renaissance66

Nearly everyone who helped describe this future said, in effect, at one point or another,“I don’t believe it could really happen,” and yet they not only yearned for it, but werewilling to invest in it. (Some already have invested quite a lot of their lives in a form ofit.) As Otto Scharmer put it, “In our own lives, this kind of scenario plays a big role, but
we have difficulty sharing it in a convincing way that would match our inner experience.”
That is the value of scenario planning. It trains you not to ask, “Why is this likely(or unlikely) to happen?” Instead, you ask, “What would it take?” What would have tohappen for this scenario to come to pass? In countries like the Soviet Union and South
Africa, we have seen impossible things take place. Clearly, this future would not cometo pass without a concerted effort. But is that all that would be required?
In my view, the New Renaissance scenario is plausible, but it would have to unfold ina counterintuitive way, almost below the surface. It could not depend on “preaching to theconverted,” because there is a sizable population of people
who dislike the trappings of this future and they are not going to go away. It would require a kind of tipping-pointmechanism, a “virus of hope” (as corporate manager
Johannes Meier put it), enabling new ideas (such as nonmaterialism) to “infect” the mainstream. It would also require some way of drawing in the people (such as, say,religious conservatives) who mistrust the surface but might
actually appreciate the depths.
Someone at the workshop said, “The original Renaissance was created by not much morethan 100 people. We already have 20 in this room.” Perhaps, people noted, some of the cultural signs of disharmony and fragmentation (such as the greed of the dot.coms) is a flippedversion of passion. “They’re not passionate about making money, so much as about creating
things.” If that is true, then the scenario of New Renaissance has a better chance of existing.

The New Renaissance scenario isplausible, but it would have to unfold
in a counterintuitive way, almost
below the surface.

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There is also a question about how “pure” a Renaissance this would have to be torepresent a true awakening. At one point, I thought I’d try to tweak the group that articulated this by asking, “Wouldn’t this be much more likely if a charismatic leader appeared—an American Gandhi?” They vehemently objected, arguing that then it
wouldn’t be a true Renaissance, because it would be one more example of a top-downhierarchy. Elsewhere, Peter Senge quoted Humberto Maturana, “If you’ve ever told anybody, ‘Don’t you see what’s really going on?’ then you are actually making a demandfor obedience” (Maturana, 2000). This future might be one that Maturana would be
proud to be part of (indeed, he would have helped to inspire it).
And that might represent the danger of such a future as well. After I heard that remark, I privately asked one of the attendees, poet Samantha Coerbell, what she thoughtof the quote. Her reaction was similar to my own, and she later voiced it to the group.
Artists continually say, “Don’t you see what’s really going on?” But they ideally do it in
a way that opens conversation, not closes it. Could the New Renaissance future toleratethat kind of inquiry? Or would it fall prey to the inevitable human inclination to adhere
to a standard line of thought, even if that line of thought were “alternative”?
Personally, I think the New Renaissance is at least as likely to take place as Corporate
Gatekeepers. I would like to see more attention paid to the undertow, for every movement
has one. What would this scenario bring in its wake, and how can the people of New Renaissance attend to the unexpected consequences of their own mind-heart-and-soul success?
Finally, what does it mean when people were asked to imagine the residents of thisfuture, two of them imagined 7-year-old girls, and the other three imagined 20-something
male medical professionals?

Scenario 4: Virus World
Society becomes a virus incubator in this future. Nothing gets bad enough to trigger a curative response, but it’s as if the world has a perpetual, low-level case of the flu. AIDS is devastating in some regions, but not everywhere, and it drops back before people get outraged
enough to invest more in a cure. Criminal activity and the Mafia-ridden economy keep
growing, but never threaten established governments or companies. Sometimes outlaw investment and drug trafficking wax; sometimes they wane. Natural catastrophes increase in
number, and global warming-related crises proliferate, but it never gets bad enough to overwhelm decision makers’ mindsets. Nationalism and new ideologies continue to emerge.
There is economic sabotage. Sea levels rise; genetic accidents occur. Iraq blackmails its way
onto the UN Security Council. Terrorist attacks proliferate without pattern.
This is a scenario of oscillating destablization. Before, the gaps were there, but mostpeople didn’t see them. Now, there is more awareness of them, but things periodicallyseem to get better, and attention wavers. After all, there is always the crisis of the moment to address, the current “spike” in the equilibrium to deal with. (The scenario grouporiginally called this future, The Spikers.) Things never get bad enough to address in any
systemic way. People now look back to Y2K with nostalgia: “Remember when we had
catastrophes that came on schedule and turned out better than we feared?”

How We Got to Virus World
It’s 2010. Politically, we have been at peace—or at least at truce—since the Clinton era.
But then how did things get in such a mess? It’s hard to remember, and frankly, the litanyof history is depressing when you think about it all at once.
In 2000, there were five high-school mass murders—all five at affluent, suburban
high schools in Silicon Valley. We paid for security systems and metal detectors, but Silicon Valley teachers and cops went on strike anyway, and most of them quit. Religious
cults gained political power everywhere, especially after a software glitch took out 11
planes during an 8-hour period in 2005. (That was the coup de grace in finishing off
Microsoft; it was subsequently acquired by Mattel.) The Russian crime Mafia had prettymuch finished off the Italian Mafia, except in Sicily and upstate New York, by 2005. They
were suspected of being behind the 2006 hacker attack on AT&T, but that was later
proven to be masterminded by a pair of 12-year-olds in Saigon, who are now suspected

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to be living in Barcelona. The crop failure of 2003 took Citicorp with it, and we miss it
now, because it wasn’t realized (at the time) how much that company served as a linchpin for global financiers who moderated economic speed bumps.
As Visteon executive Roger Saillant noted in our workshop back in 2000: “I get worried when children can take over a school in Colorado. When they create businesses.
When they create viruses that run through the Internet. I get worried when we have noprocess to accelerate wisdom and maturation to match our technology.” How prescient
he was, for that’s exactly what took place in the ensuing 10 years.
Information technology definitely played a role. By facilitating easy mobilization
around issues, it drew people into atomized sub-groups, with little contact among them.
Environmental crises further destabilized the situation, by occupying so much of theattention of political and community leaders.
Economically, we saw tremendous disintermediation—the linking of buyers and sellers directly. Without the brokering institutions, there was a further destabilization effect.

Noteworthy Implications of Virus World
As noted earlier, this is the scenario of the “boiled frog”—in Gregory Bateson’s famous
metaphor (or was it Konrad Lorenz’s?)—the pan of water is heating up so slowly that thefrog receives no warning to jump out, and remains in the pan to be boiled alive. If system dynamics turns out to be an accurate way of describing the world, then this may wellbe the most plausible scenario. (Articulating that plausibility and reconciling it with hope for the future provides acore message for some of the most powerful systems writers, such as Donella Meadows.)
The complexity of whole systems is a driving force.
So, clearly, is complacency in the face of complexity. The
whole is unable to address the problems of the whole.
And anxiety makes things worse. For instance, a global
fear of technology leads to laboratory destruction, whichleads to world hunger, because in the laboratories are all the innovations of the grains,
fertilizers and the activities that are supporting the system.
How long would society actually go down this road before there was a concerted
effort to turn away from it? And would it be possible, at that late date?

If system dynamics turns out to be
an accurate way of describing theworld, then [Virus World] may well be
the most plausible scenario.

Final Theme: Issues of Identity
68

One key theme seemed to emerge again and again in the scenarios. It concerned the unyielding nature of human identity—the ways in which people continue to seek their own
control over the way they define themselves, and to resist all other efforts to define them.
Culture, diversity, ethnic and racial identity, economic identity, corporate affiliation, thechoice of where to live and how to live—all these qualities of an individual may or may
not be immutable, but in every one of these futures, people conscientiously and stubbornly
hold fast to their right to define themselves, against all other pressures, including the pressure of any “industrial machine.”“I want to tell you a story about a woman I met in my country [Germany], sufferingfrom diabetes,” said educator Ursula Versteegen. “I interviewed her in the course of researching the response to medical advice. Doctors are always trying to have diabetic patients lose weight. Although people know they should do this, it rarely happens. I asked
one woman to talk about herself, and she said, ‘In 1988, I weighed 150 kg and I lost 70
kg and gained 70 kg within one year. I had intended never to be fat again, but I lost myidentity when I lost the weight. The problem was that I hadn’t lost the weight for myself,
but for others. I had done it to prove to Dr. X that his theory was right, and to please myhusband. Now that I had lost it, I didn’t know any more who I was—what kinds ofdresses to buy. I didn’t eat normal food; I had a powder that was like a soup. I looked in
the mirror and a foreigner stared back at me. I went into the village and people didn’tknow me any more. They walked past me. That was more frustrating than being fat.”
How will people define themselves in the future? Will it be according to ethnic clus-

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ters? Religious beliefs? Tribal values? Gender? Technological accessibility? Body type? Or
simply the way they feel themselves to be? Will people orient themselves around theplaces (geographic or otherwise) where they feel they belong? Will identity be as mercurial as fashion, or will people cling to it as their source of stability amid turbulence?
(All the futures we described are turbulent, each in its own way.) Or will the search for
identity overwhelm all other forces to somehow create a future centered around that?
If listening to customers is a powerful business practice, then identity will increasingly
influence the mores of exchange as well. But will this represent “pseudo-identity”? How
deep does a person’s identity go? What characteristics are immutable? Race? Religion?
Looks? Manner? Learning style? Habits? Preferences? Aspirations? What if people became
more comfortable in their own identities, and less subject to manipulation as a result?
As Jean Horstman noted, “Human beings have survived everything by their ability
to create meaningful association with each other. What does meaningful now mean? Is
it nationalism? Is it corporatism?” The more that identity is commodified, the more thatnationalism, tribalism, and ethnic identification increase. (This is the central tension of
the “Jihad vs. McWorld” argument [Barber, 1996].)
The importance of this is underscored, perhaps, by the resonance between theInternet and identity. A baby named Leo Blair was born the week before the workshop.
His parents found out that the name leoblair.com was already registered by someone
else. This means that if “dot.com” names become an index to all human activity (assome have predicted), then young Leo is out of luck. He would do better to change hislast name to a nonsense word—and, indeed, people may change their names frequently
in the future, so their identities won’t be cannibalized on the Internet.
The human quest for identity probably plays out differently in each of these scenarios, but it has an effect on each. (These are my own thoughts; you may have others.)
In Techno-Gods, the search for identity suggests that no matter how sophisticated thetools of the future become, they will never be used simply for control or one-way communication. They innately offer people choice, and people will always use that choice to try
to develop a sense of themselves, distinct from (and belonging with) others. The public
discourse of tomorrow may be much like the scene at some universities today, with people
identifying themselves with interest groups, based on ethnicity or sexual orientation, as astarting point from which to enter into the public maelstrom of thoughts and words.
In Corporate Gatekeepers, identity may be the source of an undertow. There will always be a group of people who don’t fit in with any corporations because they alreadyhold allegiance to other forms of identity. Or will corporations simply evolve to embrace
any kind of identity, so that no matter who you are, there will be a place where you cango to work and be taken care of? Alternatively, will the diversity of human identity force
corporations to become more like communities, force them to have allegiance beyond theimmediate bottom line, and ultimately make this scenario more plausible by blurring theboundaries between corporations and local governments?
In New Renaissance, the key driving force is an idea that people “wake up” to the systemic consequences of their actions. Does the drive for “meaningful association” make it
more likely society will wake up? Does it impede the waking up? Or is there some kind ofsynthesis between allegiance to part of humanity and allegiance to humanity as a whole?
And finally, in Virus World, people will probably find that their ability to survive depends
on local allegiances, and on the security and identity that they provide. To the extent thatpeople can settle into tribes under stress (even cyber-tribes), they may be able to weather thestorm. And if there is no end to the storm—if the decline of Virus World is perpetual—then
the identity of belonging to a tribe may turn out to be a permanent success strategy.
The amalgam of habits, predilections, and mental models that we associate with theword “identity” really represents a set of trends in human attitudes about joining, belonging, and standing apart or together. These prevailing attitudes will, in turn, deeply influence the things people expect from corporations, communities, and other groups, and thethings we are willing to give to them. (John F. Kennedy’s epigram, “Ask not what yourcountry can do for you; ask what you can do for your country,” was significant precisely
because it proclaimed that loyalty to the US and, by extension, national loyalty in general should trump all other loyalties.) Thus, identity is inextricably linked with community, and, at heart, these four scenarios raise the question of communities in the future.

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What kinds of communities are easier to foster in each? What kinds are more difficult?
What is the difference between organizations and communities in each future, and what
covenants do people naturally enter into as they establish shared relationships?
“A community is about a promise,” said Michael Burns, the Scottish priest. “We will
see one another through conflict. If there’s not a commitment for more than two days,
what’s the point of dealing with conflict?” Communities, in short, take time to create.
The decisions made today—by many people, including those at the SoL workshop—will
influence the kinds of communities that exist in 2010, no matter what future has cometo pass.

Notes
1. The workshop was convened for the Society for Organizational Learning (SoL) by J. Jean
Horstman, C.K. Prahalad, Peter Senge, and C. Otto Scharmer. Also participating were Erik
Andersen, Jim Austin, Allan Boesak, Michael Burns, Damon Butler, Samantha Coerbell, Ting Ho,
Jon Kabat-Zinn, Johannes Meier, Edgardo Pappacena, Nagah Ramadan, Roger Saillant, Sue
Sacks, Sarah Severn, Ursula Versteegen, Pat Walls, Darren Way, and Debra Woog McGinty. Betty
Alexander recorded the workshop, and Adam Kahane designed and facilitated it. (Some ofAlexander’s drawings are reproduced here.) Jean Horstman asked Adam Kahane to lead thisprocess for SoL because of his professional experience, as well as close relationship to SoL.
While he was not a member, he was part of a SoL learning circle and aware of challenges andopportunities facing the SoL community.

References

70

Barber, B. Jihad vs. McWorld: How Globalism and Tribalism Are Reshaping the World (New York:
Ballantine, 1996).
Brand, S. The Whole Earth Catalog (Palo Alto, CA: Portola Institute, 1968); (New York: Random
House, 1972).
De Chardin, T. “Hominization” (1925); reprinted in T. De Chardin. The Vision of the Past (New York:
Harper & Row, 1966).
De Geus, A.P. “Planning as Learning.” Harvard Business Review 66 (March–April 1988): 70–75.
De Geus, A.P. “The Living Company.” Harvard Business Review 75 (March–April 1997): 51–60.
Jacobs, J. Systems of Survival (New York: Random House, 1992).
Joy, B. “Why the Future Doesn’t Need Us.” Wired 8.04 (April 2000): 238–262.
Kahane, A. “How to Change the World.” Reflections 2 (Winter 2001) 16–26.
Kleiner, A. The Age of Heretics (New York, Doubleday/Currency, 1996).
Maturana, H. Lecture, SoL Annual Meeting, June 2000.
Ohmae, K. The Borderless World (New York, HarperCollins, 1990).
Senge, P.M., A. Kleiner, C. Roberts, R.B. Ross, and B.J. Smith. The Fifth Discipline Fieldbook (NewYork: Currency Doubleday, 1994).
Van der Heijden, K. Scenarios: The Art of Strategic Conversation (New York: Wiley, 1996).
Wack, P. “Scenarios: Uncharted Waters Ahead.” Harvard Business Review 63 (1985a): 73–89.
Wack, P. “Scenarios: Shooting the Rapids.” Harvard Business Review 63 (1985b):139–151.

Commentary
by C. Otto Scharmer
Can we look at the four scenarios described by Kleiner as the expression of a larger field of forcesthat redefines the coordinates of the global economic, political, and social system? What is thelarger picture here? What is the theory behind all these stories, if there is one?
What triggers these questions is my observation that vastly different participants in scenario
projects—management teams and other groups of all political and philosophical stripes—can arrive
at very similar images and projections of possible futures. There are, of course, two possible explanations for such a phenomenon. One is that the participants and facilitators lack imagination. The
other is that there are, in fact, generic forces at work that reshape the world—reshape our global
system across countries, continents, and industries. It is this latter possibility, the question of thelarger picture, on which I would like to elaborate.

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1. The rise of the high-tech economy (a digital revolution), driven by the forces of technology.
2. The rise of new patterns of relationships (a relational revolution), driven by the forces of globalization, networked fields, and individualization.
3. The rise of a personal revolution from within, something that might be termed an aesthetic-spiritualrenaissance, driven by the proliferating search for higher qualities of awareness and experience.
The three revolutions—the digital, the relational, and the personal—redefine the economic, political,
and cultural coordinates of our global system, together with the five forces that drive their development (Scharmer, 2001). Each scenario embodies one of the major driving forces mentioned above:
In Omnipotent Techno-Gods, 1 humanity crosses a technological threshold and enters a happy
new world in which everybody and everything is controlled all the time by a kind of monster matrix, the Omnipotent Techno-Machine.
Corporate Gatekeepers, originally called Gated Nations, is based on a culmination of the driving
force of globalization. In this future, a huge wave of mergers and concentrations within and acrossmarkets leaves only a dozen gigantic corporations as survivors. These 12 giants divide the world
into a structure of gated nations, each of which is controlled by one of the monster corporations.
Virus World, originally called Virus Incubator, can be seen as a future story based on the primacyof the driving force of networked fields. This scenario is based on the boiled-frog syndrome. In thisfuture, numerous interconnected crises and breakdowns happen globally, but no single crisis or
breakdown can attract enough attention and dedicated energy to fix the underlying causal structure. Thus, in this scenario, the crises go on, and on, and on.
The fourth scenario, New Renaissance, inspired me to name the fifth force the aesthetic-spiritualrenaissance. The essence of this scenario seems to be that human beings are not controlled by atechnology monster (as described in the first scenario), by globally centralized power empires (thesecond scenario), or by interdependent and self-reinforcing global breakdowns (the third scenario);
instead, they relate to each other in a more open and self-organizing way. No one force dominates,and people develop new ways of living and working together.
When aligning the four scenarios with the three revolutions (see the figure), we can see that
there is a missing scenario. There is one force that does not correspond to any of the scenarios:that of individualization. As part of the SoL scenario workshop, we discussed a possible fifth scenario, but it did not make it to the final four. The fifth scenario’s preliminary name was Ants Exploit
Elephants. It envisioned a world in which individuals and little groups at the periphery of larger institutions manage to absorb the interesting opportunities and to exploit the big institutions, rather
than being exploited by them. Another possible name for such a future is Bowling Alone, Robert
Putnam’s notion of a world described by ever decreasing degrees of civic engagement, which according to Putnam (2000), is precisely the world we live in.
Thus, summarizing the scenario exercise, we can say that we developed four stories of the future, each of which envisions a major driving force that reshapes our global system. The fifth force
is the one of ever increasing individualization.

C. Otto Scharmer
Visiting Lecturer, MIT Sloan Schoolof Management
Lecturer, University of Innsbruck,
Austria
Research Partner, GeneronConsulting71

1. Digital Revolution: The Rise of the High-Tech Economy
Force: Technology
Omnipotent Techno-Gods
3. Relational Revolution: The Rise of New Patterns of Relationships
Forces: Globalization
Networked Fields
Individualization
Gated Nations
Virus Incubator[Bowling Alone]
4. Personal Revolution: The Rise of an Aesthetic-Spiritual Renaissance
Force: Higher Qualities of Awareness and Experience (Spiritualization)
New Renaissance

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Four Futures for Organizing and Leading in the New Economy“A new world is taking shape as we move into the new millennium,” wrote Manuel Castells of
the University of California, Berkeley, in a comprehensive analysis of the state of society, economy,
and culture (1998). Castells sees the emergence of a new dominant social structure that is reshaping the socioeconomic system across the globe. Inspired by Castell’s work, I have come to see thechallenges that leaders of organizations and social movements face in terms of three revolutions:Figure 1. Five forces and scenariosin the context of three revolutions.

KLEINER
Four Futures for Organizing and Leading in the New EconomyThe first two revolutions, the digital and the relational, capture most of what has been written
about the new economy and the rise of new competitive environments—that is, stories that arise
from the interplay of the forces of digitization, globalization, individualization, and networked
structures of relationship. The third, the aesthetic-spiritual revolution, is missed by most authors
who write about the first four forces. But, interestingly, it came up as one of the major scenarios at
the SoL scenario workshop. And, like those who write about digital and relational revolutions, mostpeople who write about the spiritual dimension tend to pay little attention to the other revolutions.
Perhaps the most interesting question is not concerned with any of the individual scenarios, butwith the larger picture, the field of forces from which these scenarios arise in the first place. Maybe
the sociologist Max Weber was right when, toward the end of his life, he came to conceive of history as a process that evolves from the interplay between two major forces: rationalization (that is,
the force of the first revolution) and charisma (the force from within, the force that is shaping thethird revolution). Maybe true leadership, the capacity “to rise to the occasion” (Schein, 2000), has to
do with bringing together and synthesizing these two polarities of forces: the exterior high-tech
revolution and the interior spiritual-aesthetic revolution on the one hand, and on the other hand,
globalizing institutions and individualizing people and societies. It is the full tension between thesetwo clashing forces that defines the space of the leader’s real work.

Note

1. Omnipotent Techno-Gods was the original title of this scenario, which I find a little more evocative
than the less descriptive Techno-Gods.

References

Castells, M. End of Millenium, vol. 3 (London: Blackwell, 1998): 336.
Putnam, R. Bowling Alone (New York: Simon & Schuster, 2000).
Scharmer, C.O. “Presencing Emerging Futures: On The Blind Spot of Leadership,” Habilitation Thesis, MIT
Sloan School of Management, Cambridge, MA, 2001.
Schein, E.H. “The Many Faces of Leadership.” Reflections, 2 (Winter 2000): 2.

Commentary by
J. Jean Horstman
In his book, The Living Company, Arie de Geus identified four factors that Shell found were common among long-lived companies (1997):

72

J. Jean Horstman
Member and former Managing
DirectorSociety for Organizational Learning

1. Sensitivity to the environment—representing a company’s ability to learn and adapt.
2. Cohesion and identity—representing a company’s innate ability to build a community and persona for itself.
3. Tolerance and decentralization—representing a company’s awareness of its ecological niche andsymbiotic relationships.
4. Conservative financing—representing its ability to govern its evolution effectively.
One priority that the Society for Organizational (SoL) Council set for itself and the staff in August
1999 was the creation of a member-centered strategy process. After my first two months as managing director, I realized that this process needed to include an internal aspect centered in the aspirations and hopes of the members of the SoL community. And equally, given what I had learned
from Arie de Geus, it needed to have an external aspect that provided a sense of the current reality
beyond the community and hence made visible the creative tension between community aspirationand environmental possibility.
In January 2000, Adam Kahane crafted a scenario development process that would give thecommunity the external aspect. Kahane, C. Otto Scharmer, and I identified a question that promisedrich inquiry into the environment facing SoL, its members, and the larger world: “What are the possible futures for organizing and leading in the New Economy?” The generous, enthusiastic responseof those beyond the community whom we invited to work together on SoL’s behalf indicated thepertinence of the question.
As the next step, the scenario development team, again stewarded by Kahane, designed a process for the 2000 SoL annual meeting that focused on three questions: (1) what do these scenarios

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1. SoL’s voice, perspective, and membership must be global to be viable.
2. SoL’s brand has to be a story that has value, meaning, and integrity at the local, national, andglobal levels of business and society.
3. SoL’s sustainability requires a diverse membership and diverse range of partners.
4. SoL can provide a vital, welcoming context in which people and organizations from all sides of
an issue can meet, inquire of each other, and create new possibilities.
5. The future is not determined for any of us. SoL has a generative role to play in creating a futurealigned with life.
After the annual meeting, we distributed the scenarios to the membership, along with some guidance on how to utilize them. The same information was posted on the SoL website(www.SoLonline.org) for members and SoL Connections affiliates. Since then, various groupings ofmembers, including the SoL Council, have incorporated the scenarios in their work.
Until we undertook the scenario planning process, the US-based membership of the founding
SoL community had concerns about developing the global SoL community so quickly after its own
incorporation as a self-governing nonprofit. One unintended outcome of this uncertainty was an“us versus them” mental model. The scenario process was the first project in which the whole of
SoL looked together at what it wished to create. Through this process of exploring possible futures
together, the mental model shifted from oppositional to cooperative—the “we” emerged.
Building on this mental model shift, the members of the founding SoL community and the global SoL stewards are now working on two projects that are important to the viability of SoL as awhole. A team from the US, Norway, and Japan are shaping the ongoing evolution of SoL’s website.
By approaching the website from what was learned through the scenario process, we realized that,within a global community, a variety of centers of excellence will emerge. Rather than one SoL
community dominating all fields, a web of codependent functions is more likely. As such, this global
team is redesigning the SoL website as a global portal to support codependency.
The second project is the 2001 annual meeting of the founding SoL community. After the scenario
process, we came to see it as a meeting place for a worldwide community. The team of global and US
members has designed an environment to house the internal aspect of the member-centered strategyof the founding SoL community. Within this strategy process, the scenarios are again a tool for helping us articulate our hopes and aspirations and grounding them in the environmental sensitivity thatis a hallmark of long-lived organizations. What began as a local process that contained a global element is now a global process that is also supporting local aspiration.
When I reflect on the energy and sense of possibility generated by the scenario workshop, I am
reminded of a poem by Seamus Heaney (1991):
The Skylight
You were the one for skylights. I opposed
Cutting into the seasoned tongue-and-groove
Of pitch pine. I liked it low and closed,
Its claustrophobic, nest-up-in-the-roof
Effect. I liked the snuff-dry feeling,
The perfect, trunk-lid fit of the old ceiling.
Under there, it was all hutch and hatch.
The blue slates kept the heat like midnight thatch.
But when the slates came off, extravagant
Sky entered and held surprise wide open.
For days I felt like an inhabitant
Of the house where the man sick of the palsy
Was lowered through the roof, had his sins forgiven,
Was healed, took up his bed and walked away.

References

De Geus, A.P. The Living Company (Boston: Harvard Business School Press, 1997).
Heaney, S. Seeing Things. Copyright © 1991 by Seamus Heaney. Reprinted by permission of Farrar, Straus
and Giroux, LLC and Faber and Faber Limited.

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KLEINER
Four Futures for Organizing and Leading in the New Economy

mean for me?, (2) what do these scenarios mean for my organization?, and (3) what do these scenarios mean for SoL? This inquiry made clear five important factors for the SoL community, nomatter which scenario or combination of scenarios developed:73

VIEWS

From the ChairPeter M. Senge

CPeter M. Senge
Lecturer, MIT
Chairperson, Council of Trustees
Society for Organizational Learning74© 2001 by the Society for Organizational Learning and the Massachusetts Institute of Technology.

ulture and change in culture infuse many of the articles in this issue and, indeed,
many of the most challenging issues faced by managers and leaders.
Included in Ed Schein’s article is a perspective on culture upon which I have long relied, that culture operates on three distinct levels: artifacts, espoused values, and shared,
tacit assumptions. Schein’s view illuminates how culture is both observable (artifacts andespoused values) and unobservable (assumptions). It clarifies why managerial frontal assaults, like new mission and value statements (by definition espoused aspirations), do notby themselves alter culture—because they do not alter tacit assumptions built up overmany years. And yet it affirms what we sense, that culture matters and that changes inculture are among the highest leverage changes in any social system. Tacit assumptions
about who we are and how we do things shape thinking and acting at all levels and, by
implication, changes at this level can radiate into all aspects of organizational life.
Yet, as I read Schein’s article along with several others in this issue of Reflections, itbrought to mind a question that has begun to unsettle my pat understanding recently. Several months ago, I was struck by a simple statement from an Indian teacher, that people
are born with certain core values, that these values are intrinsic. By “values,” she was notreferring to espoused values in Schein’s framework but something deeper, more akin totacit assumptions that lie beyond our everyday awareness. Gradually, I realized that thisstatement represented a radical alternative to our common view of culture and values.
In a nutshell, my question is, “Are values solely a learned phenomenon?” I believethat it is a virtual unquestioned premise—dare I say a shared tacit assumption—among
academics and practitioners alike that shared deep beliefs and assumptions are culturally
instilled, that they are a product of our upbringing and socialization. If people act in magnanimous ways, it is because we have been taught to do so. If we act so as to avoid conflict, it is because our culture embeds norms of saving face. If there was ever a“nature-nurture” debate around tacit assumptions, I believe “nurture” would win hands
down. In fact, the strongest evidence of this, I believe, is that very few partisans for thedebate exist. While sociobiologists have stirred up the pot with reductionistic arguments
in favor of genetic determinism of behavior, these views have neither persuaded a majority of academics nor penetrated management thinking. By and large, opinion remains
firmly on the side of “people are a product of their environment.” This view conforms tomost psychological and sociological theory. It also reassures managers. Even though they
are difficult to change, deep assumptions can in principle change. This reassurance, while
comforting, may also be dangerously misleading, both philosophically and practically.
I propose that we consider a radical alternative, that deep values are intrinsic rather
than learned. In effect, this suggests a fourth level to Schein’s hierarchy: a level of intrinsic values that lay beyond culturally embedded tacit norms and assumptions.
Why might this notion of intrinsic values be valid?
First, there is compelling evidence that there exist universal values that transcend
national and ethnic cultures. I am speaking now of values like awareness (“the truth
shall set you free”), transcendence (experience beyond our normal sense of self), meaningfulness (recognizing and realizing that which truly matters to us), stewardship (responsibility for the future), happiness, and peace and tranquility. I believe these illustrate
universal aspects of humans independent of upbringing and life context. In fact, such
universal aspirations form a cornerstone of wisdom traditions worldwide, whether Indian, oriental, middle eastern, western, or indigenous.

Volume 3, Number 1, REFLECTIONS—Peter M. Senge

REFLECTIONS, Volume 3, Number 1

SENGE
From the Chair

Having conducted workshops around the world for many years involving leadershipand personal mastery, I have often been struck, for example, by the common appreciation of the power of vision across diverse national cultures with very different norms.
All seem to understand and value what it means to live one’s life committed to what ismost important to you. Though different cultures influence how this universal aspiration
is expressed—for example, by their norms around individualism versus collectivism—
all seem to appreciate that, as Robert Fritz says, “Something shifts in a human when we
operate in the service of bringing into being that which truly matters to us.” I have had
similar experiences with reflectiveness. I have yet to meet people anywhere who do notvalue the opportunity to reflect, to consider the deep patterns of their lives and why they
are alive. When I encounter these deep commonalties among human aspirations, I am
often reminded of Carl Rogers’s words, “That which is most personal is most universal.”Second, there are important implications for managerial practice, especially in thedomain of organizational culture. Most managers set off to bring about cultural change
by identifying values that they believe their organization needs to be successful. This
seems perfectly sensible, especially when the organization’s environment is changing indramatic ways that are causing traditional policies and practices to be counterproductive. But this might miss the essence of what makes for truly successful cultural changes.
Only shifts toward intrinsic values may “liberate the human spirit,” in the words offormer CEO Bill O’Brien. In another of the articles herein, O’Brien speaks of anchoring
his efforts as a change leader in “the eternal truths or values.” While he too felt that
aspects of his organization’s established culture made it ineffective, he also believed it
was essential to appeal to “the higher virtues” in order to tap people’s passion, imagination, perseverance, and creativity.
Activating intrinsic values may also hold a key to how shared tacit assumptions canchange. Schein has criticized managers and consultants who think that stating new espoused values will cause such change. But activating intrinsic values creates a differentchange process. It creates a deep tension between what we truly value and the assumptions
that are guiding our behavior. For example, activating personal vision creates a tension withthe tacit assumption that the organization’s goals are set by management. While this tension can be challenging to work with, it can also lead to shifts in shared assumptions. For
example, it might eventually lead toward a view that shared aspirations and objectives arise
from interactions among top-down (managerial) and bottoms-up (personal) goal setting.
But seeking to ground organizational cultures in transcendent values carries its own
danger. What keeps one person or group from claiming that their values are the universal values? This indeed has been the mark of cultural imperialism for ages. Americans,for example, have strong positions in many of the world’s largest organizations, rarely
speak more than one language, and have limited personal experiences having to conformto other cultures’ norms. This can result in seeing others as “just like us” and blindly
imposing norms like open discussion of conflict, simply because such norms seem likethe obvious and sensible way to operate. This is why those seeking to tap intrinsic values must cultivate humility and personal reflectiveness. This work requires more listening than talking. It requires a willingness to learn from others and to have our own
culturally embedded beliefs challenged.
The term sanskar has its origins in sanskrit and describes subtle memory “thatemerges from the energy of life transmitted through soul.” As a sort of invisible blueprintthat influences basic thought patterns, attitudes, and behaviors, sanskars are akin to thecontemporary notion of “mental models.” But they differ in one important aspect. They
are with us from birth, some inherited through karma from past lifetimes and some from
our intrinsic nature. These define who we are at profound levels beyond culture. In turn,all cultures overlay their own tacit asssumptions, many of which may be in conflict withintrinsic sanskars. When, for example, a culture embeds norms of conflict and aggressionthat conflict with innate sanskaras of peacefulness, humans live in conflict with their true
nature. This is why, in this tradition, the hallmark of all genuine leadership lies in enabling people to live in greater inner alignment, and to thereby tap their true capacities.

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