Special Report: How to Apply the Principles of Stakeholder Capitalism to Better Governance
As the practices of Enterprise Engagement and ISO standards clearly emphasize, the best organizational results come from sensible, evidence-based decisions based on achieving agreed-upon goals, rather than from the desire of different leaders to acquire power. To illustrate how the Enterprise Engagement framework can be applied to any challenge involving people, even government, and to show what ‘politics’ does to governance (without taking any sides in the nation's political debate) and management, here's how elected officials as well as all organizations can use the principles of Stakeholder Capitalism to reduce the noxious influence of politics—i.e., the focus on gaining power rather than on achieving consensus-based results. This article was originally published in November 2018, long before the Covid-19 crisis and is strictly nonpartisan; any attempt to discern otherwise misses the point.
This article uses the Enterprise Engagement framework and ISO quality people management standards to demonstrate how these principles can apply to the management of any type of enterprise, even theoretically our nation, and to illustrate how politics undermines not only the effectiveness of our government but of our own organizations. Here's what politicians can learn from Stakeholder Capitalism and what business people can learn what not to do from politicians.
The silent poison of politics.
Most everyone would agree that one of the worst enemies of effective management is office politics, defined by Merriam-Webster as: “the activities, attitudes, or behaviors that are used to get or keep power or an advantage within a business or company.” This Special Report illustrates through the example of government what politics could be doing to your own organization.
How politics undermine sound decision-making in both government and business.
Put two sports fans from opposing teams in a room about a questionable referee call, and it's unlikely any objective discussion will come of it. When people in any camp accept the righteousness of their position as a matter of faith, or as a matter of loyalty to their candidate or company ally, as opposed to a debatable subject open to frank discussion based on available facts, the conversation focuses not on finding a solution that addresses the interests of all stakeholders but rather one focused on defending one's own interests.
The need for a consensus. Did you ever stop to think that when one cuts through the harsh partisanship we see in the media and online, America benefits from a fundamental consensus? Despite the party polarization, Americans for the most part share a love for our country: we work side by side at millions of organizations creating great wealth every year and in the military to protect our country. We joyfully celebrate our national and local holidays at events together; sit together at work and in restaurants, theaters, events, religious ceremonies and on mass transit, and generally get along (and maybe even share a few laughs), whatever our differences. We root for our favorite teams together, from stadium-filled events down to the smallest local high school football games, and we support the artists and performers we love across all races, politics and religions. The US is admired worldwide for it’s ability to “get going when the going gets tough,” and for providing charitable support when tragedy hits almost anywhere in the world.
There is so much we agree on. So why is it that while Americans work, create wealth, party, celebrate and persevere together despite our political stripes or leanings, our two parties and Congress and executive branch appear to have so much difficulty getting anything done? And what might that tell us about the management of our own organizations? Is the focus by our leaders of both parties on acquiring power rather than achieving results hurting our nation, and how often does the same dynamic occur in many organizations with a similar result?
Yes, we as a nation debate a lot, and sometimes it gets nasty, especially in social media, where individuals can easily vent, stoke others, to the benefit of political power groups on all sides. We, the national “family,” or "company," face many serious problems and decisions, as do most families. But, as outlined below, most people in the US would probably agree on many of the guiding principles that could foster effective consensus-based decisions, were it not for politics and the people in political fundraising and the media who profit by dividing us. We can't easily change the dangerous dynamics of the party system in our nation, but we can minimize the impact in our own organizations by using a systematic process known as Enterprise Engagement and mirrored by ISO quality people management standards.
ISO Guidelines Applied to Our National Elected Officials
To illustrate how politics affects governance and the lessons for organizations, this report draws upon the principles of Enterprise Engagement, created in 2009, and more specifically the seven ISO quality people management principles and ISO Annex SL management framework developed in 2012. The principles and framework were designed to help provide a benchmark for the effective leadership of an organization. So, why not apply these standards to see how our elected leaders are running the federal government, or any state or local government as well, and what can go wrong as a result of politics. (Coincidentially, the principles of Enterprise Engagement
and ISO standards overlap in their focus on addressing the interests of all parties in a strategic and systematic way.)
The fundamental danger: politics. When one analyzes the actions of all our elected federal politicians under the lens of Enterprise Engagement and ISO standards, as outlined below, one quickly sees that the major culprit for paralysis is politics and the party system. Since the Enterprise Engagement Alliance focuses on organizational excellence and is therefore strictly non-partisan, we choose the example of our elected officials not to single out any party or administration, because the problem is systemic, but to clearly illustrate a fundamental challenge every organization must face: the pernicious impact of politics and power-struggles on sensible decision-making, implicitly or explicitly, a risk that was warned against by some of our founding fathers and, ironically, is addressed in Enterprise Engagement ISO standards as well.
To illustrate how politics thwarts effective people management, here is how the US president could apply the seven Quality People Management principles and how those same principles can be applied to our own organizations.
Principle 1: Customer Focus
The organization’s focus on current and future customer needs, expectations and requirements.
The problem with government and effective management anywhere often starts here. Who is the customer with our elected leaders? The active party member, lobbyist and donor, or the loyal voter or common citizen, regardless of party? The obvious answer highlights the fundamental challenge faced in a party system based on the competition for power: In order to raise money and obtain local party machine support, politicians must focus where the money, volunteers and likely voters are, rather than on the needs of all “customers.”
Government action plan: Using the Enterprise Enagagement and ISO framework, a president, governor or mayor would declare that the customer consists not just of the party base but of all citizens of the US and its protectorates. The internal customers are the civil servants and military we need to engage, train and properly equip if they are to provide effective, efficient service to us, the citizens, or external customers, and we also need the engagement of government contractors and their employees. Currently, in our two-party system, the prime customers appear to be each party's base, which is effectively about one-third of the country’s adults for either party, leaving the rest dissatisfied.
Organizational action plan: Who is the customer in your organization? Is it always the customer and the internal audiences needed to serve them? Or does your organization have people, power bases or parties whose egos need to be satisfied through a process that disrupts sensible, evidence-based decision-making?
Principle 2: Leadership
The establishment of a vision and direction and goals; models organizational values; establishes trust and equips and empowers employees.
This principle is critical to effective governance of any enterprise, because the management principles, culture, values and objectives help craft specific policies, actions and outcomes. In the political arena, elected officials often dissimulate their true intentions for partisan or power purposes, which explains why partisan pundits on both sides often appear to make little sense when supporting a preferred candidate's questionably inconsistent position. Does this ever occur in your organization? When executive leadership involves the nation or management team in developing clear principles agreed upon through a consensus-building process, it is more difficult for people to profess one intention when in fact their recommendations reflect another.
With Enterprise Engagement and ISO practices, the goal of leadership is to find consensus around a vision, plan and prorities and then engage the entire team in their fruition. This involves helping the country or organization visualize what it looks like on its best day and how each of us can contribute to its vision. As noted above and further illustrated below, the US has a remarkable advantage over many other countries and even large organizations: Contrary to popular belief, and beneath the debates between parties and Blue and Red states, there is as much consensus in the US as there is in a typical organization or family for that matter. The problem is that the media, political parties and partisan fundraising groups and the surveys that support their interests don’t seek to know what we agree upon. Most make and raise money by seeking to know how we can be divided. The Enterprise Engagement and ISO framework suggests that the two-party system makes it all but impossible for any leaders to follow this fundamental requirement to lead all people.To generate eyeballs, our media fosters conflict and outrage; to raise money and gain party support, our elected leaders and their fundraisers divide rather than unite. Once a party wins, the winner generally excludes the other from the policy-making process except in times of national emergency. And, when some minority party members seek to reach across the aisle to cooperate, they often get pushback from their own party’s base unless it’s a no-brainer cause. Politics all but eliminates the ability to employ effective leadership that benefits all stakeholders, including both citizens and customers.
Government action plan: Based on Enterprise Engagement and ISO principles, a new president of any party would run on a platform of guiding the nation during his or her administration through a consensus-based approach. Upon entering office, he or she would immediately seek to break down the divide by creating a task force and series of subcommittees with the goal of fostering sensible, evidence-based policies to address the most pressing short- and long-term issues. Using a model embodied in Enterprise Engagement and ISO standards, one central task force would guide the process. Led by the president, it would consist of cabinet members, leaders from both parties and advisory boards of experts from every relevant sector, as well as representatives of major American political, racial, religious, business, union and not-for-profit groups, from the National Rifle Association to the American Civil Liberties Union. For each major issue, developed through a process outlined below, their task would be to draft a report with a set of principles, priorities and recommendations based on the most pressing current challenges, as well as serious long-term challenges, developed by a consensus of experts and other Americans. These recommendations would be presented to the executive branch to guide planning for action, legislation and budgets, and would be shared with Congress for similar purposes upon the president’s final approval.
This process, which many presidents have used to address national emergencies, does not undermine the rights of either branch, including the president, to make their own final determinations, but this process would provide the American people an effective means of sizing up the underlying motives or outside influences that could affect final legislation or legislative action. In effect, this report is the government equivalent of an Enterprise Engagement Business Plan, aka a Business Operating System, to address all the key issues necessary to accomplishe agreed-upon results representing input from all constituences.
The task force and its subcommittees start by agreeing upon common principles to guide decision-making, just as an Enterprise Engagement Business Plan includes a statement about the organization’s culture, values and objectives, and the process to achieve success. The goal is to agree on principles broad enough to address the needs of all constituencies so that the future policy-making process is guided on the principles of consensus rather than on control of power by the base of one party or the other. To repeat a point: having clear principles are critical to exposing dissimulation and other tactics often used by politicians to gain power rather than fulfill the objectives, and this applies equally to any organization.
Finding general principles a majority can agree upon. A critical step is to look for fundamental purpose and general principles upon which most people could probably agree. For the purposes of illustrating the point, these might include:
1. The need for peace through strength and to support the values for which our veterans and their families served and sacrificed.
2. The right to equal access to high quality education and healthcare for all that does not burden people and businesses with taxes and regulations that stifle opportunity and investment.
3. The need to ensure equal opportunity for all races and genders and support for economically or otherwise disadvantaged people balanced against unintended consequences of fostering dependency; excessive taxation and regulation or policies unfair to the children of the more advantaged.
4. Controlled immigration that meets the labor needs of business often not available locally and that remains true to the words etched on the Statue of Liberty, “Give me your tired, your poor, your huddled masses yearning to breathe free” that welcomed our own forebears--balanced against legitimate security concerns.
5. The desire for effective, customer-oriented government while managing debt, taxes and intrusion in our lives.
6. The right to breath clean air, drink safe water, work in a safe environment and to leave for our children a sustainable environment while balancing the impact of regulations on both business and workers.
7. The need to minimize abortions and unwanted pregnancies.
8. The need to minimize access to and use of dangerous drugs.
9. The right to enjoy our own individual ways of life as long as we do no harm or forcefully impose our preferences on others.
10. The right to bear arms while ensuring the safety of those who don’t.
Of course, there is significant disagreement on how to address these issues. It becomes the job of the bipartisan committees to address the thornier details related to policy making. Once the fundamental principles and priorities are approved, the president would provide a timeline for each task force to find evidence-based, sensible recommendations to address the challenges of reaching these goals for the benefit all customers—i.e., citizens, not just a party’s base—that transparently weigh the common trade-offs often required in difficult decisions. Yes, it's difficult--juries make tough decisions every day in our courts. And sometimes there are only "best shi**y solutions, as articulated in the movie Argo, about the rescue of hostages in Iran. By starting first with clear principles, those with hidden motives have a tougher time making “sensible” recommendations consistent both with the agreed-upon principles and their true intentions, as these contradictions usually become exposed in the form of unconvincing or outright illogical answers. These principles also guide the focus and composition of committees. The committee chairs, in the case of government, likely cabinet members or administration officials, would work in cross-functional groups to make sure the dots are connected as much as possible to improve efficiency and minimize budget impact. Unlike in national emergencies, this is an ongoing process that continues throughout every administration until a new president is elected and creates his or her own task forces, if desired. A strictly non-partisan leader, running on his or her strengths of leadership and competence rather than on gaining power for followers, might actually retain a previous administration’s tasks force--even if from another party--if it is functioning effectively.
In this unlikely scenario, candidates would lead basic on vision, experience, and competence, rather than on party affiliation per se.
Organization action plan: Does your organization have clear agreed-upon culture, values and goals adjusted at least annually to address new market circumstances? The Enterprise Engagement and ISO framework provides a system for coming to a consensus on almost any issue by focusing on a common culture, values and goals, and using evidence, facts and research rather than politics to make decisions. Innovative organizations use this same formal approach to systematically incorporate the input of key stakeholders and experts into every key initiative to ensure that decisions are for the common good, to the extent possible, and aren’t used by a leader or faction to accumulate or exercise power.
Principle 3: Engagement of People
This principle ensures that peoples’ abilities are used and valued; that people are accountable and enabled to participate in continuous improvement, learning and knowledge-sharing through open discussions.
The politics and struggles for power by multiple communities and sectors of the economy through lobbyists make it impossible to engage everyone at the same time to address an issue, except in times of war or crisis. Congress basically deliberates and votes by bloc, with minimal cooperation on any issue for fear of enraging their respective bases, and the executive branch reflects the judgement of the president who risks all by ignoring the wishes of the base. So, by any standard, very few presidents deeply emotionally engage more than about 45% of the voting public, except for short periods of time.
Government action plan: Based on Enterprise Engagement and ISO principles, the executive branch would focus heavily on nurturing the vitality and productivity of the task force and committees by continually monitoring their progress and results, ensuring that they have the necessary information, data and analytics, and/or training to grapple with the difficult issues that events, social medai and other processes are included to foster open discussions between all “factions,” and that they have tools to conduct surveys or even research when necessary. The executive branch would work closely with legislative leaders to glean from the recommendations language for legislation to address the related issue in the context of recommendations from other task forces. This process provides some semblance of a systematic, integrated and aligned plan, rather than the reactive, ad hoc approach of national government today. Having such a set of agreed upon principles would also help engage and focus our government employees on how they can contribute to success in their departments and daily jobs by providing a clear sense of purpose.
Organization action plan: This same task force approach is vital for managing the need for continuous improvement and change and will only thrive with the leadership of the CEO. These task forces can address ad hoc short-term issues such as a major change initiative or help oversee key organizational policies and actions to ensure alignment, efficiency and return-on-investment over time.
Principle 4: A Process Approach
The management and measurement of activities as processes and deploy resources effectively.
By now, anyone reading this article who follows US politics has given up hope for effective national government. This concept of applying a process approach seems among the most daunting faced by any organization driven by power and politics versus evidence-based, sensible decision-making. Let that be a warning to those of us in the private sector. A process approach forces leaders to put down the patronage and buddy system and related politics and demands they act like businesspeople managing resources for the long-term sustainable good of all Americans. For organizations with leadership who understands modern human capital management, this is among the most fun and easiest part of the job; for political leaders, it's almost impossible because of the two-party system and focus on power versus sensible decision-making.
Government action plan: Just like legislation today is subjected to independent review for its impact on government income and the budget, the task forces would have included in their charge the ability to not only make formal recommendations for legislation or executive action, but also weigh the impact of all bills or legislative decisions against the agreed-upon vision. This is the equivalent of the cross-functional leadership approach that guides Enterprise Engagement-oriented organizations. Of course, the president and Congress can ignore the recommendations, but they do so at the peril of going against the agreed-upon principles. The same applies for the CEO of any organization.
Organization action plan: Looking at your own organization, ask yourself whether it’s sensible, process-oriented thinking or whether decisions are made based upon politics, power, and control. Do decisions emerge from agreed-upon culture, values and goals, or to please a leader or faction whose power is based on a specific course of action? After initiatives have failed or succeeded, it’s interesting to look back to see if sensible analysis or the power to please leadership was at the root of the initiative.
Principle 5. Improvement
Improve organizational performance and capabilities; align improvement activities; empower people to make improvements and celebrate them.
Politicians fear that by even trying to align people across the aisle will get them voted out of office. A sensible approach to addressing the issues related to all the many values Americans agree upon would require people to cross party lines, which is fatal to party fundraising, or for the fundraising of the groups and factional media that support either side or who even those who make an attempt at neutrality. The application of Enterprise Engagement and ISO standards in government wouldn't put the media and other organizations out of business, nor should building a consensus do damage to organizations. What it does is put the burden on leaders to provide research-based or sensible recommendations that support their solutions balanced with other concerns.
Government action plan: Based on Enterprise Engagement and ISO principles, the executive branch would report regularly on the progress of the improvement process; i.e., recommendations turned into legislation, outcomes of initiatives, good and bad. As outlined in ISO standards, the executive branch establishes trust by transparently reporting on both successes and failures and directs the task forces to continually solicit and recommend improvements. The president would publicly recognize accomplishments, as well as call out deficiencies or a need for change.
Organizational action plan. Any organization with a systematic approach to quality management already has monthly/quarterly and annual cross-functional meetings to regroup on key objectives, outcomes and improvements required, as well as recalibrate initiatives for coming years.
Principle 6. Evidence-Based Decision-Making
Ensuring access to accurate and reliable data and analytics to improve effectiveness.
Government does a good job of collecting data but, like many organizations, not such a good job of using it. Multiple independent government bodies provide extensive data on all sectors of the economy upon which businesses, investors, researchers and others depend, giving our politicians at least as much, if not more, information than most organizations possess to support decision-making. Once again, politics distorts the use of data for the benefit of the base, rather than for the benefit of seriously analyzing issues that have yet to be addressed.
Government action plan. The president demonstrates a commitment to ensure information gets into the right hands untainted by bias and to help the task forces and the interested public make sense of the data and the legislation that comes out of the administration and Congress. When appropriate, the president communicates directly with the nation.
Organization action plan. Is there a culture of evidence-based decision making in your organization? Do facts or factions win the day when it comes to key decisions? Is everyone getting the information they need to make the best recommendations or do the jobs necessary to achieve organizational results?
Principle 7: Relationship Management
Establish relationships based on both the short- and long-term; share expertise, resources, information and plans with partners; collaborate on development and development activities and recognize supplier successes.
Chalk up another victim of politics in government. Party-based leadership does a great job of building relationships with the base, but a terrible job of building relationships with everyone else. The party in power by definition is in opposition often with the very experts and others who could help achieve results.
Government action plan: In both populating and reviewing the recommendations of the task force and committees, the executive branch strictly focuses on supporting evidence-based and sensible recommendations that balance the benefits, risks and costs, both short- and long-term, for all stakeholders before recommended legislation is created or executive orders drafted.
Organization action plan: What type of relationship-building strategy does your organization employ? Is your organization doing everything to create a vital community engaged in sharing ideas, working together to make improvements and working for the common interest of all? Or do factions vie for power even if it means supporting policies for which there are no facts-based, sensible explanation or that, upon examination, undermine the true intent of the guiding principles?
In government, politics is not just the fault of leadership but of a system that fosters a focus on power rather than sensible, consensus-based decision making. Similarly, in organizations, the fault is often with leadership and the boards that select them. This article is not written with the expectation that presidents one day will use Enterprise Engagement/ISO frameworks for leadership, or that individual politicians will go against the fundamental party loyalty required for survival to reach across the aisle to find sensible, facts-based solutions—even though the nation would benefit if they did.
This Special Report is published to demonstrate how Enterprise Engagement and ISO standards can be applied to any organization—even elected government—and more importantly to make a point to organizations about something CEO's can control: the existence of the noxious often unspoken impact of office politics. Without realizing it, many organizations suffer from the same affliction as our elected government: decisions get made based on the desire for power rather than sensible, facts-based solutions, to the best of our abilities.
The good news is that business is not generally hamstrung by the dynamics of a party system. The amount of office politics is usually in direct proportion to the lack of top leadership with a clear vision or process for enabling a vision across the organization in a collaborative way, such as outlined in Enterprise Engagement and ISO quality people management standards.
The bad news is that when there’s a lot of office politics, the problem lies usually with the CEO, which is why increasing numbers of management experts believe that the next generation of CEOs will have to demonstrate greater people leadership capabilities than now required, as well as an understanding of human capital management systems, such as those embodied in the Enterprise Engagement and ISO standards. As is clear from the above, the same applies to our nation's presidents.
Originally published in November 2018
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