Capital intensive industry united Ownership, Decisions and Returns
At the beginning of the industrial era, establishing a corporation was a challenge of capital. Manufacturing plants demanded ever larger amounts of capital for plants, equipment, raw materials and to fund the costs of production and distribution. The providers of capital were the entrepreneurs and were rewarded with the returns of the venture and control of the decisions. This was reinforced with the adoption of hierarchical manage structures to manage assets and information and control decision making.
We have carried through to modern management practice the unity of ownership, decision making and return. We simply inherited these concepts from original corporations. One of the few adaptations is a necessity of scale that in many large organisations with diversified shareholding boards and senior management have taken the decision making (and in some notorious cases the returns) as agent of the shareholders. Even still the prevailing dialogue is the maximisation of shareholder returns.
The Future of Work Changes the game
Increasingly we work in networks as knowledge workers, often spanning the boundaries of organisations in our sharing and work in the process. Knowledge work is rising as a share of the work in the developed economies.
Dan Pink popularised that purpose, mastery and autonomy are sources of motivation and engagement. Knowledge workers particularly benefit from a sense of ownership of the work and the ability to make decisions as to how work will be delivered. Freeing these enables the development of mastery of the craft of knowledge work. Harold Jarche has highlighted that work gets better with freedom to share and connect as well.
Importantly in manage knowledge working roles, value creation is potentially exponential and directly related to the worker’s talents and outputs. An engaged knowledge worker is far more productive than one filling a role in a hierarchy and a process.
Ownership, Decisions and Returns aren’t tied together
We need to move from a default position of uniting ownership, decision making and returns. The process and approach we use for each should be a unique decision in our organisations.
Own Purpose: Ownership of capital differs from ownership of the purpose of the organisation. Shareholders rarely provide the means to bring people together and give them the meaning to contribute their efforts. This broader sense of ownership of purpose and a commitment to the community of the organisation is a far more important leadership challenge in the networked knowledge working organisation.
Free Decisions: We can separate decision making from shareholding. Modern management would not be possible without this. However we still allocate decision making to hierarchy as proxy for shareholders. With appropriate coordination, knowledge workers can have far greater autonomy to make their own decisions in line with the strategy of the organisation, to experiment and use networks to coordinate and resolve issues.
Reward Talent: Capital may still needs its return. Returns are needed to attract the people who fund the start-up, help with infrastructure and provide the working capital to enable a knowledge worker to be paid before a customer pays. Those returns may not always be financial. Importantly, this return will often be after the substantial returns to knowledge workers for their contributions. Again this concept is not new. Professional service firms, investment banks, movie studios and other businesses dependent on the value creation of knowledge workers have paid high shares of returns to their knowledge workers.
Legal Structures Change All the Time
The corporation is just a legal structure. Legal structure change when needed. We have employee owned businesses, not-for-profit companies, B companies, social enterprises and many novel forms of organisation because people saw the need to work in a different approaches to ownership, decision making and returns.
These changes apply to for-profit businesses too. Look at any joint venture between two large corporates and it will have a complex series of agreements implementing different models of decision making, ownership and returns than that which flows from the traditional shareholding approach. Many global corporations already have different classes of shares to separate ownership, decision making and returns. Management can use the same approaches internally to separate and improve ownership, decision making and returns.
Responsive Organisations need to ask themselves the question:
What approaches to ownership, decision making and returns will help our people to better engage with our purpose and respond to our customers?
Change that leverages these answers will help make work more human