The following piece is posted here by kind permission of the author, Mr Promise Hsu. It was originally publishe in Mandarin in VISTA magazine, March 8-17, 2010
and translated from Mandarin Chinese into English by Stephanie Schubmehl
HOW THE BIG CORPORATIONS LOST THEIR WAY
By Promise Hsu
• The Toyota scandal
• The financial meltdown
• The rise of the United States, Japan, and China
What ties these world-shaping events together? Thanks to a lifetime of globe-spanning inquiry, two elderly Brits may have the answer.
“It is critically important for China to distinguish good capitalism from bad”, the 80-year-old William Hopper tells our reporter. With his brother Kenneth, 83, William has been creating a buzz in business and management circles, thanks to their 2007 book, The Puritan Gift: Triumph, Collapse and Revival of an American Dream, named by the Financial Times one of that year’s Top Ten Business Books.
For its 2009 reissue in paperback, the book was re-titled The Puritan Gift: Reclaiming the American Dream Amidst Global Financial Chaos. Not surprisingly, the financial crash has boosted interest this book. In an article for the magazine Strategy+Business, British management guru Charles Handy hailed the new version of The Puritan Gift as one of the top leadership books of 2009. According to Handy, leadership was in short supply in the year-long aftermath of the crisis on Wall Street and the Hoppers’ book served as an ideal reminder of where the business world truly stood.
In the January 2010 Harvard Business Review, executive editor Sarah Cliffe described it as “this astonishing book about American managerial culture.” She added, “I’ve never read a business book that packed so much information, history, and insight into one compact volume.”
Older brother Kenneth, once a department head at Procter & Gamble, has decades of industrial and management consulting experience under his belt. Younger brother William, an investment banker, has served in the European Parliament. The insights their book has to offer, though, are not simply a product of their professional lives. More importantly, the brothers are seeking an ultimate solution to the chaos that has engulfed the corporate and business sectors.
Today the Hoppers are busier than ever, constantly updating their blog, fielding lecture and interview requests, and corresponding with readers. Between February and March 2010, William was blogging almost daily. One item that caught his attention was Toyota CEO Akio Toyoda’s acknowledgment before a U.S. Congressional hearing that the company had “lost its way during a period of rapid growth.” The apology came as no surprise to William. He says Japan’s corporate sector began to lose its way years ago, when it retreated from the corporate system and workplace values imported during the U.S. occupation (1945–1952). “That,” William says, “was good capitalism.”
As for the bad kind, the brothers blame post-war American business schools, particularly after the 1970s. As curricula became dominated by “financial engineering,” profit and performance were prioritized before all else.
A Foreseeable Crisis
When the book’s first edition came out three years ago, William and Kenneth made a point of raising concerns about Toyota. They believed the automaker -- like Sony, Hitachi, Mitsubishi, Panasonic and other Japanese brands once synonymous with quality -- was losing its focus. As William points out, the evidence was emerging long before the brothers completed their book in 2006.
According to James P. Womack, who made a name for himself studying Toyota’s “lean production” practices, the carmaker’s troubles began in 2002. That was the year Toyota rolled out plans to expand its share of the global market from 11 percent to 15 percent. Womack derided the scheme as “just driven by ego,” calling the 15 percent goal “totally irrelevant to any customer.”
William Hopper’s analysis goes a step further. Back in 1993, he says, U.S. auto analyst Maryann Keller was already admonishing Toyota to take a long, hard look in the mirror. Keller’s book criticized Toyota for trimming vital “middle management” positions even as headquarters tightened its control company-wide. A top-down, hierarchical approach replaced what had been a bottom-up, participatory managerial culture; attention to detail and quality suffered as the company’s expansion picked up speed.
Many management experts would stop there, but, for the Hoppers, Toyota is only an example. They have a much broader vision. The Toyota scandal, the achievement and shattering of the American Dream, good and bad managerial cultures, the global financial crisis -- at first glance, it is difficult to see what any of these has to do with a book titled The Puritan Gift. Take a moment to think about what the title is saying, however, or engage more closely with the authors, and the connections become clear. What’s more, this book touches on many aspects of the globalized world we live in -- and more importantly, on our own individual lives.
In a sea of information, history, and concepts, the Hoppers seek the answer to a single question: what factors create a work environment that promotes well-being? In other words, why and how do people work? This is a fundamental question, because without such an environment, no company can experience sound growth. Some, like Toyota, may enjoy a moment of glory, but it will not last.
And so the Hoppers take their readers on a journey across centuries of history. One important conclusion they reach is this: the factors most conducive to the sound, sustained development of a work environment originate with a singular worldview -- one handed down from a group of migrants who left Europe for North America more than 400 years ago.
They were known as Puritans: a people who believed in stripping away man-made conceits and giving oneself over to the will of God. This God was supremely powerful, and as the word of God revealed to mankind, the Bible was the final arbiter in all matters. Puritans crossed the Atlantic in droves during the early seventeenth century, spurred on by their opposition to the way religion was practiced in England and throughout Europe. In North America, they intended to create a new homeland, one that would allow them to do God’s work.
As the Hoppers see it, this endeavor essentially laid the foundation for the modern free-market society. The values inherited from the Puritans are sharply distinct from those of other peoples and places. Despite their relatively small numbers, the influence of the Puritans is felt everywhere from education (they founded the Ivy League schools of Harvard, Yale and Princeton) to organizational management (the Presbyterian Church, republican government, the parliament, the board of directors). Here the authors would seem to be crossing into historical or even theological territory, which may come as a surprise for those accustomed to more traditional business fare. But the Hoppers have much more to show their readers.
The factors most conducive to the sound, sustained development of a work environment originate with a singular worldview—one handed down from a group of migrants who left Europe for North America more than 400 years ago.
Why Do People Work?
Both in their eighties, the brothers believe that the sustained, healthy development of a work environment is a product of spiritual and historical traditions. They learned this first-hand, which may be why the autobiographical portions of their book are so engaging. Kenneth and William are the sons of a chemist. Trained as an engineer, the youthful Kenneth went to work for a branch of Procter & Gamble after a colleague of their father’s touted it as the best-run industrial firm in the U.K.
Kenneth found himself fascinated by P&G’s workplace culture, which contrasted sharply with his experiences in two British firms. Despite the company’s complex structure, decisions on points of detail were handled with great efficiency.
That experience planted the seeds for the book Kenneth would complete at the age of 80. He wanted to find out what was going on in the world. Later, Kenneth’s professional life became what amounted to an extended global tour of workplace cultures. Working in Ireland, he witnessed the rebirth of the Irish economy. He also watched continental Europe rebuild itself after World War-II. In the United States, he had the chance to observe the Golden Age of the American corporation. And he was in Japan as that nation was shaping itself into the world’s second-largest economy.
Throughout his long working life, Kenneth occasionally took time to write about his experiences, whether for newspapers or academic journals. Later, he planned to integrate these pieces into a single work, but health problems prevented him from completing the project. Fortunately, his brother William helped put the book back on the agenda. William’s experience as an investment banker on both sides of the Atlantic, and as a member of the European Parliament, served to broaden Kenneth’s outlook.
He also introduced Kenneth to a friend who would prove critically important to the brothers’ work: Peter F. Drucker, a pioneer in modern management theory. In a letter dated October 3, 1983, Drucker expressed his eagerness to read Kenneth’s forthcoming book, which he intended to order from the publisher as soon as it came out. Kenneth still has the letter. As it turned out, the book would not be completed until after Drucker’s death in 2005. Kenneth still regrets that his friend, who dedicated his life to bettering society, never saw the book in its final version.
Aside from his friendship with the brothers, Drucker contributed indirectly to The Puritan Gift by making a pivotal introduction. It was through Drucker that the Hoppers met three American engineers who had played a central role in Japan’s postwar reconstruction. This gave them the opportunity to examine Japan’s transformation and offered a new perspective on the United States.
Part of the blame for Japan’s corporate crises lies with the curriculum that has dominated American business schools since the 1970s. To an even greater degree, this helped bring about the sub-prime mortgage crisis in the U.S. & Europe.
Another friend whose help shaped The Puritan Gift was American management guru W. Edwards Deming. Deming, too, had helped rebuild Japan after the war, and he is still remembered in the Japanese business world for his role in convincing manufacturers to prioritize the pursuit of quality management.
In the course of discussions with these eyewitnesses and their own work in Japan, the brothers formed a conclusion: it was thanks to the influence of Puritan values that Japan had been able to develop its impressive postwar line-up of quality brands. Furthermore, the social changes that later swept the so-called Asian Tigers and the Chinese mainland signified the spread of these values.
William’s recent blog commentary on the Toyota scandal revisits territory covered in the new edition of the book. The current scandal, he says, is actually a reflection of a much larger crisis, one aspect of which is the decline in “middle management” mentioned earlier. As the Hoppers see it, Japan began to turn away from Puritan values in the 1990s, when many young Japanese were setting their sights on an American MBA degree -- one of them being Akio Toyoda, the face of Toyota’s younger generation, who was 26 when he graduated from a Massachusetts business school in 1982. In contrast to older generations, they had little first-hand knowledge of the industries they were working in.
Part of the blame for Japan’s corporate crises, the Hoppers argue, lies with the curriculum that has dominated American business schools since the 1970s. To an even greater degree, this helped bring about the sub-prime mortgage crisis in the U.S. and Europe. These failures, they go on to explain, began when business education departed from its original Puritan ethos. To a typical Puritan, work was not simply a way to earn a living, to amass wealth, or to display one’s talents; rather, it was a “vocation” or “calling.”
Central to the concept of “vocation” is the idea that people do not work for themselves, or because they have no choice but to work. They do so in order to fulfill a God-given mission, for the good of themselves and of others. As for human needs, the Creator has promised to provide for all those who do His work. Just as the historical influence of the Puritans has spread into every industry, the blessings of this all-powerful Creator extend far beyond what any individual can conceive. Toyota was fixated on becoming the world’s biggest automaker; Wall Street was busy amassing paper wealth through complex feats of “financial engineering.” Viewed in this light, they have been straying farther and farther from their roots.
The Cult of the Business School
Over recent decades, the authors write, business education has lost sight of its own values; as education became increasingly focused on landing a decent job, the big questions were shunted aside. Aware only that the subject was gaining in popularity, students and their instructors had no intrinsic motivation which would tell them why they ought to work, giving rise to professional managers whose only goal was making money.
The Hoppers have dubbed this phenomenon “the Cult of the (so-called) Expert”. Cults, in one form or another, have wrought havoc throughout history. In the political sphere, they have been known to threaten popular wisdom, and the same holds true for economics. Of course, as the Hoppers acknowledge, the business school did not create this cult in and of itself. But as educational institutions, business schools -- along with the entire university system -- are responsible for molding new generations of professionals.
The problem is with the notion that a prestigious business degree is an instant ticket to the top -- when in fact, any job at all presents an opportunity to develop expertise. The dot-com bubble, the Enron scandal and now an epic financial crisis have given the business world a wake-up call. Goldman Sachs, for instance, reduced the proportion of MBA graduates among its new hires in 2000, from 75 percent to 25 percent. The consulting firm McKinsey is also recruiting fewer MBAs.
But it isn’t just the corporate world that’s in trouble, according to Kenneth and William. Corporations are only one facet of society. The Toyota scandal and the Credit Crisis, for example, have something in common. As companies began sacrificing quality in favor of performance and rapid growth, there were insiders who recognized that something was gravely wrong. Yet they failed to bring their concerns to management’s attention, or failed to make management take them seriously. For a worker to deliver bad news directly to a superior requires uncommon courage; character of this sort is rooted in an individual’s fundamental attitude toward work, which in turn is rooted in prevailing social mores.
The Hoppers support a view that Peter F. Drucker came to hold in his later years: fixing the corporate sector will require a society-wide revival of spiritual values. Just as it took nearly two centuries to establish the United States, such a revival will not happen overnight. It took the Hoppers a lifetime simply to write their book. But perhaps their story is cause for optimism: late in their lives, they have given us an extraordinary gift. The Hopper brothers have never forgotten that a society, once it has managed to achieve prosperity, must decide where to turn next.
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