Business reformers must never stop being revolutionaries. Seeking to understand organisations and the rationalities that drive them, German sociologist Max Weber developed an important distinction. It is between "substantive rationality" focused on the achievement of ends and "procedural rationality" focused on adherence to means.
Weber argued it is a characteristic of all organisations for the latter to displace the former. Conversely, organisational change and renewal often involves the attempt to reinstate substantive rationality as the chief focus of activity. Thus, the inevitable injunction of almost all third-sector strategic reviews – we must focus on impact.
Weber’s insight came back to me recently in the context of a review in my own organisation and of conversations about two commendable campaigns for business reform; one calling for more employee share ownership, the other for greater corporate transparency.
The people I have spoken to about these campaigns are deeply committed to their respective causes. Yet I doubt they were born with the enthusiasm they have now. The reason they latched on to their chosen issue is more likely to be because they formed the view it would be a powerful catalyst for a wider vision of better lives in a better economy. Behind their choices of issue lies an implicit theory of system change.
I think they may be right. But they must be vigilant in avoiding the inevitable tendencies of issue-based campaigns. These tendencies are thrown into sharp relief by two concurrent trends. The first comprises the ever-declining confidence of the public in the motives of big business, plus the regularity of examples of corporate malfeasance. The second is the growth of corporate social responsibility initiatives, nearly all of which claim to have succeeded in getting companies to commit to be more ethical.
Weber’s observation points to the danger that an issue pursued by an advocacy organisation gets detached from its underlying rationale. Thus greater transparency or wider employee share ownership become an end in themselves rather than a route to system change. The processes that lead to this shift are subtle but powerful.
It is easier to measure narrow than wide outcomes. We can count how many organisations sign up to a best practice code, but it is much harder to know whether doing so has led to a genuine change of culture and values. Organisations should judge themselves by the achievement of transformative goals. The problem is accountability. As head of a thought leadership organisation like the RSA, I can fairly be held responsible for the quality of research reports and the attention they garner, but not nearly so reasonably judged on whether our ideas are implemented by policy makers let alone whether they make the world a better place.
This is a widely understood dilemma when trying to assess impact but it is related to another less obvious, but arguably deeper, problem. By developing metrics that relate to an issue rather than the system, the temptation is to define and pursue those metrics in the ways that can be most easily accommodated within the existing ways of doing things. Yet this undermines the very motivation that gave rise to focusing on the issue in the first place. This is inevitable. If there is a relatively easy and incremental way of proving that an outcome has been achieved and a much harder, more disruptive way of doing it, organisations are bound to choose the former.
All this is exacerbated by Goodhart’s law, which states that when a measure becomes a target, it ceases to be a good measure. In other words, the point at which a reform outcome is deemed to be the criterion of success may be the point when the relationship between that outcome and wider change starts to disappear. For example, a first wave of companies might sign up authentically to a transparency charter. But once that charter is seen as a badge of credibility, further waves may add their names while finding new ways of hiding information or covering up bad actions or motives. Similarly, if employee share ownership is seen as good branding, workers may be given a stake but without disturbing the hierarchy or power relations in the firm.
I am not for a moment criticising these specific causes (both of which I support), much less the tremendous people behind them. I am describing inherent organisational challenges. However, both Weber’s analysis and the evidence that campaigns can succeed while their wider aims fail, lead to imperatives for all of us advocating reform.
We need to craft our organisational aims to minimise the danger that we can achieve them without a wider impact. A disruptive failure may be better than a pyrrhic success. Too many CSR initiatives focus on companies making rhetorical commitments rather than evidencing real change. Organisations need the agility to change their reform goals if these no longer seem likely to lead to deeper outcomes. Also, however tempting it is to focus on the achievable and the measurable, we must keep asking whether our theory of change stands up to scrutiny. To sum up this advice: think like a system but act like an entrepreneur.
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