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Article - Opinion

The Search for Meaning: A Conversation with Charles Handy

Charles Handy: "The current system of capitalism is not going to be sustained !"

OCIAL philosopher, management scholar, best-selling author, and radio commentator Charles Handy is an influential voice worldwide. One of the first to predict the massive downsizing of organizations and the emergence of self-employed professionals, Handy has a gift for looking 20 years ahead at ways society and its institutions are changing. The Irish-born, London-based author spoke with Leo Bender during a visit to the United States.

Leo Bender: Charles, how do you view the business-guru system -- which you're part of -- in the United States?

Charles Handy: It's interesting because we don't have that in Europe. The people who are respected in Europe are the captains of organizations -- people like Percy Barnevik or Richard Branson -- rather than what you might call the commentators.
I am very unusual in Europe, and a lot of people think I'm American. The two continents are extreme in their different ways. In America, you give too much importance to the commentators, because they have a tendency to oversimplify the world -- that's what you have to do if you're making a one-hour presentation or writing a wildly popular book. In Europe, on the other hand, if you're actually running an organization, all you can usually do is talk about that organization or others like it. That's what you know. We actually need in Europe to have more people who can stand back and generalize.
You need both traditions. I think we overdo it in Europe, not having the communicators, and I think you overdo it in America, paying too much attention to them.

LB: How can we achieve more balance between the two traditions?
CH: I would like to see American CEOs taking a higher public profile on the social and economic issues of the day. Bill Gates and Jack Welch should not be the only leaders anyone hears from.

LB: You propose a model of corporate governance that gives shareholders far less management influence. That certainly challenges conventional wisdom in this country. Explain your thinking.
It seems to me rather obvious that the current system of capitalism is not going to be sustained, and let me explain why. The assumption, in the Anglo-American context -- and it's different in continental Europe, different in Japan, in China -- is that the company is a piece of property, owned by the people who buy shares of it. They therefore have the right to sell that property.
But what is this property? It increasingly is a collection of people. The tangible, fixed assets of these corporations are worth considerably less than their market value. If you take the pure knowledge organizations -- advertising agencies, banks, software companies -- the market value may be 20, 30, 40 times the fixed assets. I think the rhetoric of the stock market is concealing from us the fact that what we're actually talking about is owning other people.
Now when we think about it, this is both strange and in the end unworkable, because organizations, as we know, are whittling down to the core. Outsourcing everything they can. They are going to employ a relatively small proportion of all the people they need. Those core people, therefore, are going to be rather competent. And they are going to resent being owned by other people. They're going to say, "No, you can't just sell us over our heads or dictate our strategy. Furthermore, if you don't like it, we will leave." So what is the point of saying that you own something when actually that something can walk out the door?
The stock market is just a casino. When you buy shares in Microsoft, for instance, you are taking a gamble. It's not just a gamble on the profitability of Microsoft; it's more than that. You are gambling that Bill Gates can continue to motivate young people to work like fiends for the company. Therefore, I argue, stockholders will revert to their true role as investors and not owners. They will not have the right to combine and sell the company over the heads of its people.

LB: What do you say to those who argue that it is the shareholders who take the risk, who give the organization its capital? And how do you raise the capital in your model?
I'm not saying we shouldn't have any shareholders. I'm saying go back to the old system of A shares and B shares. A shares are voting shares, and you only have A shares if you're a member of the company, or have seriously invested in the company. We can assume that anyone who has, say, a 1 percent stake in a company is there for the long term. If the big stockholders who are proper members of the company think that the company is doing badly and want to change the management -- well, they have votes, they can intervene. But they'd have to discuss it with other members. They couldn't just do it from the outside.
Then you have the other category of investors, the B shares, who are what you might call the parasites. These are the bettors, the traders, or the people in the secondary market who say, "Well, my stockbroker tells me that the next three months are going to look good for GM." They don't really have any responsibility or commitment to GM. They're not even putting any money into the business. The money that's churning around in the secondary market -- which is most of the stock market -- is going nowhere near the company. Most big companies do not raise new money in the stock market. They either raise it from the banks or from retained earnings. It's mostly new companies that raise new money from the stock market. The reason that the stock market is so important is not because it raises money; it's because it is putting a price on your property. Somebody else can buy you. When your stock price goes down, you're worried, not because you can't raise more money -- you weren't doing that anyway. But suddenly, it's as if your house is valued at half the price of the house next door.

Now, clearly we need entrepreneurs, we need people who take big risks and get big money from it. I'm not saying that that shouldn't happen at all. We need investors, we just don't need them to control the company's destiny.

LB: Is anything like this system happening?
You begin to see it in the small businesses. I'm developing a concept that I call the citizen company. The inhabitants, if you like, are citizens. They have rights. They have the right of free speech, to express their preferences. They have the right of residence. Now we may have to put some boundaries on the right of residence -- 10-year or 15-year rights -- but they know they have a place in this community.
In new businesses, the start-up group -- which may be 10, 20, 50 people -- has a psychological stake and often a financial stake in the business. These people use what I describe as the twin hierarchy approach. That is, there is the hierarchy of status -- though not more than three or four levels. You find this in professional organizations, with senior partners, ordinary partners, and associates who would like to become partners. But you also have a totally different hierarchy, the task hierarchy, where you group people irrespective of their status into operational teams around projects. You can actually have a partner or even a nonpartner leading a project group with senior partners being part-time members of that group.
These citizen companies will also have probationary citizens: you have to show that you can speak the language, that you subscribe to the values. Finally they will have the outsiders, whom I call the mercenaries. That is not a bad word, necessarily. It's simply saying that you are hired for a particular task. You're not a member of the community. You are a very useful adjunct. My worry about companies at the moment is that we're all mercenaries. We're all there temporarily, but when it's time to move along, the theory of employability goes, you will be a better mercenary somewhere else.
I'm saying we need all three categories: full citizens, probationary citizens, and mercenaries. Deciding which is which and what the proportions are, and how you actually manage them, is the task of leaders and citizens both. But unless you have the citizen category, everybody is going to think like a mercenary. And that's dangerous. Mercenaries owe loyalty to no one except themselves and their careers. They tend to go to the highest bidder. Keeping their commitment, therefore, becomes increasingly expensive.

LB: The search for meaning -- in the workplace, in the community, and in public life -- has become a growth industry. What do you think that signifies to leaders?
My book, The Hungry Spirit, is an attempt to answer that. I think the search for meaning applies to individuals and to institutions. We're all looking for why we do the work we do. It was easy in the past -- we were doing it because we needed the money to live. Now it's clear that money -- for many people and institutions -- is more symbolic than real. We generate more wealth than we really need to live on. And money becomes a rather crude measure of success. We're looking for something more.
There is, in my view, no God-given explanation for each of us as to what success might be. I do believe that we are each of us unique. We each -- institutions as well as individuals -- have something to contribute to the world, and the search for meaning is finding out what that is before we die. Until then we have only tentative answers.

The first half of life is certainly a struggle to prove that you can survive and then can achieve some special capacity. But the interesting thing for me is that given that you can survive, that you are successful, what is it you can contribute? The companies that survive longest are the ones that work out what they uniquely can give to the world -- not just growth or money but their excellence, their respect for others, or their ability to make people happy. Some call those things a soul.

LB: How can leaders help their organizations discover their unique purpose before they die?
Organizations are significantly different from individuals in that individuals die and organizations can live forever. Very few do. The Catholic Church is perhaps the longest living, but Mitsui of Japan and Stora of Sweden are over 600 years old. My Oxford College is 650 years old. The interesting thing about organizations is that they can make the assumption that they're never going to die. And the reason that you stay immortal is you have discovered what's unique about you. The job of the leader is to work that out. To express it. Very few leaders succeed in doing this. I ask a lot of leaders of organizations what it's all about. They usually say survival. I say that's only the first stage. If you're no use to anyone, you can't survive. What is it that you uniquely as an organization can contribute to the world?
Most don't know the answer. Why then would you want to devote your life to an organization that can't give something special to the world? No reason except that you get money or get a kick out of it yourself. But after getting those, you'll probably leave the organization. Businesses have an enormous amount to learn from nonprofit organizations. Successful nonprofits have had to be very clear about their unique contribution and the difference they make to the world.

LB: You talk about society organizing itself around the affiliations or clubs that people choose for themselves. What will be the primary affiliations in the future?
I think there will be two. First, a work affiliation. If you're a citizen, in my language of organizations, you're strongly affiliated with that organization. If you're a mercenary, it will probably be a professional club of some sort. In London, people who have a multiplicity of clients and occupations, who don't really have a professional liaison, have formed private groups they call "hives." They meet to share some of their problems but also for friendship, because they're working on their own. They don't identify themselves with a particular profession; their profession is being self-employed. It's partly social, partly work-related, and mostly female. We need to create more of those because I think everybody needs to have a work club. People also need a social club. Not in the sense of recreational club, but a bit of society to which they feel they belong. That, I'm arguing, is not the nation-state. It's the city and probably below the city, the district or social group.

LB: How will this change our social institutions?
I think that Europe, for instance, is going to be organized around cities rather than nations. Cities are something we can relate to much more easily. Increasingly, national governments in Europe will become less powerful. You'll have supernational governments like the European Union, and you will have more powerful local, regional, city governments. And nothing much in between -- which is why of course there's such a fuss going on in Europe at the moment. This is in essence what is going to happen in America. Some of the states will have to delegate more power to cities. Federal government will still be important for international affairs and broad national policies, but city government will become key.

Central government has done many things. And I'm not arguing that this should change, I'm just arguing that it will change. It seems to me that people want more control over their lives and what goes on around them. And all the evidence is that as you get richer, you demand these things. So one of the strange things is that there are no rich dictatorships. When dictatorships are successful economically, the pressures for democracy become too great. I'm arguing that as countries get richer, even under democracy, they become more participatory.

LB: Are you suggesting that there will be revolution in China in 20 years?
Probably not revolution but I would say dissolution. I find it hard to think that China -- which is developing at an incredible rate in some bits, and almost nothing in other bits -- is going to hold together. So I can see China falling into 20 different bits, reverting to its history as a nation of regional warlords.

LB: You were very optimistic in The Age of Unreason about the prospects for flexible organizations, healthy communities, and more fully integrated individuals. Your later work takes a more sober view of the future. How hopeful are you?
Simply making money, big flashy vacations, are not what it's all about.
I remain pessimistic in the short term but optimistic in the long term. I do think that we humans are creative people. We will find solutions. In the short term it seems to me that we've become very selfish. I'm worried about capitalism, that it's distorted our purposes in life. The argument against the Age of Unreason eight years ago was that I was describing a world that was very well suited for a person like myself; that it was easy to have a good, independent life if you had education, professional skills, and a good partner. I took that criticism onboard; I think it was true.
Now my argument is not that we should change the world, but that we should try to make more people like me, if you will; people who have the skills and competencies to live in this more free-form world. I believe we will succeed, but it's going to take at least a generation. I believe in capitalism and competition, but we have got to equip everybody to cope with these two forces, and we have got to keep things in perspective. Simply making money, big flashy vacations, are not what it's all about.

LB: Clearly, education is key to equipping people for the world. What do you see as the future of our school systems?
I think that one trend that's coming is that every child should understand at an early age his or her intelligence profile. This follows psychologist Howard Gardner's idea that there are several different kinds of intelligences -- analytical, interpersonal, practical, physical, musical, and so on. People simply have different aptitudes. Once we have identified those, we can design an individual curriculum which, for at least half of the school time, concentrates on developing those particular intelligences, irrespective of the core base of the teaching.
It's already beginning to happen. Middle-class parents now say, "We want more emphasis on music, want more emphasis on sporting abilities -- and we will pay for that outside of school." The school day should be split in two. The first half is what you might call a required, common curriculum, taught by schools. The second half is an individual curriculum in which many outside organizations take part -- work organizations, community organizations. These activities may be organized by the school, but they may or may not take place in school. The school becomes a kind of broker for learning.
When it works properly, every young person will leave school with a personal portfolio of competence, including many more items than the classroom captures.

LB: With all the changes you see, what do you think are the keys to sustaining positive change in an organization or in a community?
Change is always difficult. There are many people for whom the present is comfortable, who would rather not change at all. You've got to have confidence in the future. That's partly something you get from the community, from the institution, and from the leaders who say things are going to be better. It's also something that comes from inside you. You need an inner belief that you are in some sense meant to be here, that you can leave the world a little different in a small way. If you think that you're an accident of biology and that everything you do is because of your genes, or your early upbringing, or things that the government has done -- if you see yourself as a victim -- then I think that you will regard everything that happens to you as outside your control, an imposition. You would not be prepared to change unless you could see a direct, immediate payoff.
Leaders of institutions have to believe and declare that there is a future for their institution, some hope of glory, whatever that might be. Second, they have to make clear to the individuals that they are special to that dream of glory. That they are there because they can make a contribution and so can believe that there is a reason for their existence. Yes, we do inherit things from our parents, and yes, our upbringing affects us. But the great challenge of life is to override these things and to do better than them. We can do that. This is our unique human capacity. We can override our inheritance. I want leaders who can make people feel that this is true. Within limits, we can be what we want to be. We can, with great leaders, create something glorious.

LB: Beyond giving people hope about the future, don't leaders have to put all the pieces in place for getting there?
The leader's first job is to be a missionary, to remind people what is special about them and their institutions. Second it is to set up the infrastructure for that to happen -- not the superstructure, not to take the actual decisions, but to set the support systems, the people in place. The two go together; it's no good having a brilliant strategy and structure and great people unless there is some reason for it. And it doesn't get you very far to go around saying how wonderful things will be in the future without knowing how you might get there. This combination is rare.

LB: You've worked with outstanding leaders from many types of organizations. What do you see as the key attributes that make them successful?
Passion. They really have to believe in what they do. Ironically, this means they can occasionally believe in very bad things. Most effective leaders, therefore, also have a moral compass. They've also got to be quite tough in order to deliver their passion. The effective leaders that I've met are a strange combination of passionate human beings who can communicate that passion to others and who, at the same time, are forceful, take big risks. If you don't measure up, they get rid of you. If you can do both those two things, you get commitment from people. It is winning that commitment that makes effective leaders. Finally, the leader must be prepared to admit that he or she does not have all the answers. This is a very rare combination: someone who is passionate, very tough, and at the same time able to doubt.

LB: Are you saying leaders are born, not made?
I don't think you can teach the skills, or learn them from others, but often it is a matter of finding yourself in the right place. You may be hopeless in trying to run IBM, but put in charge of a school, you may make all the difference. In other words, you may say you're not a passionate person, but if you find something you're passionate about, then you've got one of the three elements of being a true leader. You may say, I say myself, I'm not able to be tough. But if I was engaged in running something I was passionate about, I think I could be tough.
Then one says if you're passionate, how do you have any decent doubt? I think you can be pulled up short by life. A friend or loved one dies, which suddenly gives you a jolt. You sense that you are not all-powerful. Maybe you say, "I've got it wrong. Maybe building this business, about which I'm passionate, isn't the right thing." So while these skills cannot be taught, they can be brought out under the right circumstances. One of the things that you can do in life is look for the right circumstances. I often say that life is like an apple -- it falls into your hands. But it won't fall into your hands unless you stand under the tree. You have to find the orchard, find the tree, and then something may happen.

Charles Handy has written some of the most influential articles and books of the past decade, including The Age of Unreason and The Age of Paradox. After working for Shell International as a marketing executive, economist, and management educator, Handy helped to start the London Business School in 1967. He has worked closely with leaders of business, nonprofit, and government organizations. (June 1997)

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