Over the past 25 years Charles Handy has built a reputation as one of the world's most thoughtful and readable management thinkers. Through more than a dozen books, numerous speaking engagements around the world and his broadcasts on BBC Radio, the Irish-born Handy - a former Shell oil executive and London Business School professor - has developed a profoundly ethical and philosophical (but non-religious) approach to business, organisations and the world of work.
Aside from a more human kind of capitalism, Handy is well known for his early predictions about downsizing and the growth of outsourcing, his strong advocacy of decentralised organisational structures based on the federalist principles of "subsidiarity" (local authority) and "twin citizenship" (loyalty to both the local unit and the corporate centre), and his adoption of a "portfolio life" - a multi-faceted, multi-client freelance career in which individuals take responsibility for their own earning potential, personal development and general well-being.
CPO Agenda caught up with him recently in London ahead of his 74th birthday and found him concerned at the way the world is moving.
You've described yourself as a "brand". What does the Charles Handy brand stand for these days?
It stands for humanity; I present the human side of industry. I think it stands for the truth in that I tell it like it is. It also stands for accessibility, in the sense that I try to write and talk in language that people can understand. My mother once said when I showed her my first book, which was full of jargon, "I don't understand these words. I don't understand why there aren't enough words in the Book of Common Prayer and the works of William Shakespeare for you to be able to explain everything you want to explain." I've always carried that in my mind.
Do you think people have a tendency to overcomplicate business, management and organisations then?
Absolutely. We had Allan Leighton [chairman of Royal Mail] to breakfast this morning and we were agreeing that basically it's all common sense. We dress it up in jargon because we try to professionalise it, but that ends up making a lot of people feel insecure, because they don't know what the words mean. Business is very simple conceptually, even if it's not so easy to do in practice.
Has your "brand" changed over time, or has it been pretty consistent?
I think it's matured and got richer. When I started off the brand was basically a good speaker, a good writer, but it began to carry other overtones as time went on. A large part of my brand is Britain really, because I did Thought for the Day on BBC Radio 4 on and off for 20 years. It's a religious slot, although I didn't talk religion, I talked what I hope was good moral sense. That has coloured my brand to some degree in many people's eyes, I think. They see me as an ethical kind of guy. I want to see more of the good in people brought out in organisations of all sorts. In my autobiography I come back to Aristotle, who said the secret of a good life is what he called Eudaimonia, which most people translate as "happiness", but which really means "flourishing", doing your best at what you are best at. I believe that if we spent more time at every stage of our lives helping people to find out what they are best at in organisations and schools, everywhere, the world would be a better place.
You have been very critical of the influence of investors, but "shareholder value" still seems to be the guiding principle of modern capitalism. Do business executives put too much emphasis on it?
Yes they do. I tell them that not-for-profit organisations - charities and so on - are always desperately short of money and that money is a priority. But interestingly they never talk about it, it's seen as housekeeping. What they talk about is what they do. Of course you have to keep shareholders happy and you've got to pay people well, but you should talk more about what you do, whether it's delivering the mail or providing great food. Don't let the money side dominate the news agenda or your priorities. Stock options, which are seen as a way of aligning the interests of managers and shareholders, have distorted the priorities of businesses. I'd rather align the interests of managers and customers, to be honest. Companies think they need to keep shareholders not just happy all the time, but excited, even jubilant. It's a bit like people who have a fetish for keeping the house clean, instead of creating a happy family.
Do you think this mentality, and the short-termism that goes with it, is ever going to change?
Well, it's beginning to change, not because anybody listens to me, but because there are other forces at work. For instance, the key managers now have to be well looked after and rewarded, because their intellectual property is more and more important to organisations. They are beginning to sense that it's rather crazy to hand over the ideas that they've created in return for a salary. So I think increasingly you may see people behaving a little more like the relationship I have with my publishers. All the intellectual property of my publishers is held by outsiders - people like me. They take what I give them and polish it up a bit. The way they pay me is performance-related; I get so much for every book sold. But it's my property, my copyright. I think more and more organisations are going to find their managers beginning to take the same view. This is a feature of outsourcing, you get mini management buyouts of different little bits of the organisation, and they then become a supplier back to the main organisation. What that means is that the people who are creating the value added are going to have a first call on the surplus profits. So the power of managers relative to shareholders is going to shift. You can see it in the investment banks like Goldman Sachs, where they command a huge slice and the shareholders get what's left.
Is the growing influence of private equity a good thing in your view?
It's very much on the rise and that concerns me in the long run. These people are not very accountable to anyone except themselves. And they are much more powerful than other types of shareholders. They make things move very fast, they are adventurous and they take more risks, but they are not accountable. They make their money by reshaping companies and selling them off, and they can sell you down the river if they want to. I think there's a danger if they get too big. Acting on the fringe they are very healthy, because they take pretty ropey companies and sharpen them up. But if they become the dominant feature of capitalism I think it would be a bit worrying.
In The Empty Raincoat, you wrote that "it is easy to lose ourselves in efficiency, to treat efficiency as an end in itself". Is this still a problem in organisations today?
Yes, I think so. They forget about effectiveness. Efficiency can be a help to effectiveness, but sometimes people lose sight of the end result. Just cost-cutting and improving the delivery can sometimes go against effectiveness. Take the Royal Mail, for instance: it would be extraordinarily more efficient for them just to deliver to post offices. I'm sure they would increase their profitability because they wouldn't have all these postmen pushing letters through people's doors. But it wouldn't be very effective. Because it is publicly accountable and the government is the only shareholder it isn't likely to happen, but you can see other companies wanting to do that. Pushing your call centres off to the other side of the world is a form of efficiency that may harm effectiveness and, in the end, your business.
In procurement terms, most large organisations are doing the same things: reducing the number of suppliers they deal with, trying to consolidate disparate expenditure and enforce contract compliance, standardising processes, and so on. Do you see any dangers in this?
I think it's dangerous in various ways. The first is that it destroys local autonomy. I go into my local supermarket in Diss in Norfolk and I want a particular form of risotto rice, which they don't have. I ask to talk to the store manager, I say I'm a regular customer and I like cooking risotto. He tells me it's out of his hands. I say "Don't you run this joint?", and he says "Well, to an extent, but head office tells me what the layout should be, what I can order and how much I should charge." You can see the cost savings and the efficiency of this, but you're losing the customer contact, the local autonomy.
Procurement professionals often find it hard to get their jobs done in a decentralised environment, and some long for greater centralisation of decision-making power. Is that a mistake?
It's a natural desire - you want to make your bit of the business as efficient and, in your view, as effective as possible. But you've got to step outside your own particular function and see what the ripple effect of that is on the whole culture of the company. If you reduce the company's operations to its component parts and then optimise each of those, the theory is that if the marketing is brilliant and the purchasing is brilliant, then it will all end up beautifully optimised at the top. But it doesn't work that way. It's a much more organic and complicated thing. It's like working on the muscles in your arms and getting them absolutely wonderful, then working on your stomach, and so on. If you did that you'd probably be rather a strange looking human being. You've got to treat your body as a whole body, just as you've got to look at the whole organisation. You shouldn't be taking control away from people at the front end and limiting the feedback buyers get from customers just because it interferes with the nice little scheme you've set up. So a desire for centralisation is understandable, but it's dangerous to go too far in that direction.
Cross-functional teams are heralded as the panacea to the problem of corporate silos. Are they the best way to get things done in a modern organisation?
Well, it depends. If they are trying to negotiate and liaise between the pillars of the organisation then I think it's a lot of talk and nothing much happens. It's often what I call "boxing the problem". In other words, if the problem is co-ordination between sales and purchasing then they will put it on the organisation chart, say it's a cross-functional team and think that solves it. In my view, it seldom does.
But if the cross-functional team is a complete entity, a profit centre, that is responsible for everything they do and which draws on other functions when they need them for advice or delivery of particular expertise, then that's fine. My vision is of organisations made up of lots of independent little businesses with, at the centre, a series of brokers who can also be suppliers. The legal service, for instance, could be outside the organisation, but it could also be inside. The same goes for procurement. They can recommend their preferred option, but ultimately it's a local decision. At the moment it seems to me that procurement people are dictating, rather than offering. I think that's power in the wrong place.
The power and the decision-making should be as close to the customer as possible, leaving the centre - and this is my federal model - with a small group of reserve powers. These reserve powers are basically the big-money decisions for the future; the strategic decisions. Do we move into France or America? Do we develop a whole new line of products? And so on. But the centre has also got to remember that if its strategic decisions are going to be implemented the businesses must buy into the strategy. They must have the right to debate these decisions and to say no.
What makes a good functional leader in today's company?
Well, in my ideal organisation where the centre supplies but doesn't control, the good leader is someone who is, to a large extent, an educator. They educate the internal customers about what procurement or whatever function it is can offer, then they seek to build a relationship where they try to persuade them of the value of their goodies. At the same time, a good leader is scouting around to find out what is best so that they draw on the best in the world, whether it's in procurement or marketing or personnel. As a leader you should be the gatekeeper for best practice, and then you should be the teacher of that best practice to the people who are your internal customers. That means an awful lot of personal relationship management, and that's not something that people necessarily like.
Is it something you can teach people?
I think you can develop it in people. I don't think you can put them in a classroom and teach it. But you can show them that working through people is really rather a nice way of working. It's much more fun than sitting behind a computer and pressing buttons; it gives much more meaning to life. But people are scared of it and they're probably not very good at it, so they need coaching and mentoring, and it helps if they start as young as possible.
You mentioned call centres earlier. Do you see the trend towards outsourcing and offshoring continuing?
Yes, but it goes back to efficiency versus effectiveness. You've got to be very careful what you do outsource. I'm partly responsible for this in a way, because I came up with the idea of the "shamrock organisation". Routine things can be outsourced, but you don't want to give away the essence of the company. In theory, it's very efficient to have about 100 people at the centre and pretty well everything else done by other people, a network of contracts that holds the whole thing together. I dare say many of your readers will think that's ideal. But if you aren't careful you lose your soul, your culture; it's just a box of contracts. I think outsourcing will continue, although it may be called by other names. But, as a simplistic method of reducing costs, I think it will die down. We are already seeing that outsourced call centres don't seem to be working for some companies.
What effect do you think the growth of China and India is going to have on our lives in developed nations and globally?
Well, they are going to be the dominant economies in 20 or 30 years' time. Most of the things we buy are already made in China; a lot of the services we use, such as financial services, are now in places like India. I don't think we mind about that. The more worrying thing is what kind of jobs will be left for us. We could become a two-layer society; there will be the local jobs in restaurants, hairdressers, estate agents and so on, and then there will be the very high-powered bits of big global corporations - the "brains" responsible for research, product development, strategy and so on - but there won't be much in the middle. I think our big organisations will fade away here. There is a danger of Britain becoming a museum, famed for our universities, our theatres and our countryside, but not actually a very productive kind of nation.
Is that also a threat to other western European countries and to America?
I don't know about America, it's such a big country, but it won't be the dominant economic force that it has been in 30 years' time. But if you look at a country like Italy, it's got no big organisations, it's mostly small companies, such as fashion houses. There's not much there that can't be done globally in China or India, apart from perhaps the design. All those little factories that have been part of the strength of Italy will go, I think. It's very worrying for the Italians. I talked to a group of Italian businessmen last year and I was saying that I don't think it's a very comfortable future, and their response was "Well, they can't have our lifestyle". That's all very well, but you need the work to support it, and that will be done elsewhere.
Is work-life balance going to be even more elusive in this world? Aren't people going to have to run faster just to stand still?
The paradox is that now that work can be done anywhere, and more of us control our own work lives, we actually punish ourselves, either because we're frightened or because we're excited. And some of the work is very exciting. So we're guilty of doing it to ourselves. But I think what's going to happen is that we will "chunk" our lives in a more significant way. In other words, in our twenties we will experiment, we will dabble in things, travel a lot. We won't be tempted to settle down and get married until we're in our thirties. Then we'll have a period of 20 years where we work our guts out, whether we're running a restaurant, building roads or in the high-powered centre of an organisation. And then I think in our fifties we'll move on to what I call a "portfolio life", where you do a number of different things and life will be much slower; it certainly won't be the competitive stage of our lives.
What advice do you give to managers and executives in their fifties who work in big organisations and are thinking about changing direction?
You are going to have to be independent, one way or another. So find out what it is you can sell that other people want. Set up on your own or with others, because big corporations are not really going to want to focus on you. They'll want one or two guys who are wise, but middle management people or heads of functions once they are in their fifties will be more expensive and more out of date than people 20 years younger and they will be pushed to one side. If it's a benevolent company they may be put in some kind of advisory role, but if they are wise they will take whatever money they are offered and get out. In the meantime, if you are in your forties think very hard about the last 30 years of your working life, because it won't be in an organisation, unless you are fortunate. You will live to your mid-80s, all being well. What are you going to do? I think people will look back at their time in organisations like they do at their university years. They will have a wonderful opportunity if they are ready for it. That means saving some money and honing your skills.
Corporate social responsibility has become a big movement in recent years. To what extent do you see yourself as the "father" of that?
Not at all. I really disown a lot of that stuff. The danger is that it isn't done properly, it's just box-ticking. As part of its DNA, a responsible company treats its people well, looks after its customers, is interested in its local community and also takes care of its shareholders; it doesn't have to shout about it. I do believe that corporate social responsibility is very important, but if it's seen as something done by a separate function then it's another example of "boxing the problem".
Are companies going to be able to afford to be socially responsible in the ever more competitive world we are moving into?
Yes, in the long term. If they are not seen as a decent company people will walk away. They won't get the managers, the customers or the suppliers they want. Nobody really wants to be associated with a short-term, greedy organisation.
You've said in the past that we live in "a time of confusion". Do you see the world around you getting more or less confusing in the 21st century?
Much more confusing. Choice is, in many ways, a terrible thing. Life was very simple when I grew up in rural Ireland. Now we have all this time and all these choices. We have a paralysis of choice. Even the government wants us to choose things, whether it's a school or a consultant at the hospital. In order to sort your way through this confusing array of choices we don't teach philosophy, we teach retail therapy. It's harder now to know what you want in your life and what you belong to. You used to belong to a village, then you belonged to an organisation, now people belong to clubs on the internet. I think it's a troubled world. Prosperity doesn't always mean progress.
How optimistic are you about the world your grandchilden will live and work in?
Well, I think they will have many more opportunities than I did, but I'm not sure that will make them happier. I don't envy them, actually. They will need to work out even in their early youth what they are good at. I would like schools to concentrate more on finding whatever talent they've got and not confining their education to two or three areas of intelligence.
What about business schools? You've been very critical in the past of the way they are run.
They are beginning to change, at long last. They have realised that management is a mixture of classroom and practical experience. In the future I think the essentials of business will be taught in schools in the way that they are now at undergraduate level. But that doesn't qualify you to be a manager, it's just necessary for life. I also think business schools will be more critical of the establishment. At the moment they basically take best practice, package it and pass it on. I think they should be asking more questions and saying the sorts of things about business that I am saying. They are not very intellectual places, they are training colleges. If you're going to be a leader or a senior manager you ought to be questioning the status quo, not just accepting it. I see movement in the right direction on that, so I'm moderately hopeful. It's a pity that business schools went off on the wrong foot, and I'm partly responsible for that. They ought to teach more about ethics and values, and what a good business is all about.
Career file
Charles Handy: Management thinker and author
1932 Born Kildare, Ireland
1956 Oriel College, Oxford: graduated with first-class honours in "greats" (classics, history and philosophy)
1956-65 Shell International: marketing executive, economist and management educator, South-East Asia and London
1965-67 Sloan School of Management, Massachusetts Institute of Technology, Cambridge: MBA from its executive programme
1967-77 London Business School: designed and managed only Sloan programme outside the US; in 1972 became full professor, specialising in managerial psychology
1977-81 St George’s House, Windsor Castle: warden of this private conference and study centre concerned with ethics and values in society
1981 - Writer, broadcaster and speaker: author of 15 books and numerous articles; presenter of radio programmes for the BBC; chairman of the London-based Royal Society for the encouragement of Arts, Manufactures & Commerce from 1987-89; awarded the CBE in 2000
Interview by Geraint John
