We don’t like to use so-called “traditional” approaches to management, these days. Certainly, military ones are falling out of fashion – even specifically singled out as out of step, if you will, with the times. No, today we don’t command; we empower, give away ownership of decisions, and even let our teams self-organize.
But the thing is, unity of command isn’t so much about asserting rigid control as it is about establishing enlivening clarity. And clarity in organizational structure provides a number of great benefits. The most important of these is in its effect on authority and responsibility.
Clarity helps ensure that authority is not dissipated in unproductive – even destructive – ways as it is delegated throughout the organization. The use of this central aspect of unity of command can easily be reconciled with many of the management methods employed to benefit, and benefit from, the modern knowledge worker.
But when you follow that chain of authority back up the system, in order to retain its clarity, it must terminate unmistakably in a single source. Authority flows from formal responsibility, and if the origin of responsibility within a given organizational structure cannot be indisputably located, then the clarity with which the attendant authority is delegated is inescapably at risk.
And that is the general situation we have in publicly-held corporations in the United States. The ultimate legitimate source of responsibility, the owner, has been cut off from normal expression of it by the corporate veil, in order to provide protection from liability. It is then simply hijacked by the only force within the corporation that has sufficient power to enforce its claim: management.
Moreover, this usually takes the form of assuming authority only, while still attempting to conceal responsibility behind the veil. But these two cannot be separated.
As a consequence, modern publicly-held corporations inevitably lack unity of command in its most fundamental sense. Its expression is fouled at the source. It is no good, either, to “agree” to superficial fixes such as “lead directors” and the like. No such fiction can resolve the inherent disruption in the flow of legitimate responsibility and authority, a disruption that is unavoidably inherent in the legal structure of the anonymous shareholder-owned corporation.
This is a cost, a price we must pay to enjoy the unquestioned advantages of this form of organization. But that doesn’t mean that we should pretend that the problem doesn’t exist, and that we can, or must, leave it to be addressed by the managers who serve on their own and each others’ boards. We know, after all, that their interests and those of owners don’t naturally coincide.
So, where does that leave us regarding corporate governance of companies organized this way? We’ll look at that next. See you tomorrow!
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This post is a part of a series. You can learn about and link to the other articles here: Corporate Governance and Capitalism
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Today’s tip: Speaking of not submitting passively to received wisdom, particularly about military culture and its intersection with the civilian world, there has been some reporting and commentary making the rounds, lately, that promotes an assumption (please see here about the dangers of this) that young Americans returning from war must be presumed to be psychologically damaged and dangerous, and treated accordingly. One series that advances this premise is highlighting public records it has found of violent crimes committed by returning veterans. Yet, the only analysis of that data that I’ve seen actually shows it to indicate that vets are substantially less likely to commit such crimes than the general population. In that vein, please see this enlightening piece by Chris Blattman, about research conducted on this issue in Africa.
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Hi Jim,
This needs to be shouted from the rooftops! The negative ‘command and control’ reputation of military leadership is more fallacy than reality. A more supportive, clear, responsible system doesn’t exist.
“Clarity helps ensure that authority is not dissipated in unproductive – even destructive – ways as it is delegated throughout the organization.”
A truer sentence has never been published! As leaders, we need to provide that clarity, and support the delegated authority, throughout our individual chain of command. If the strategy isn’t clear when we get it, the ‘buck’ stops. Find out, get clear, move forward.
Thanks for lifting the veil to reveal the service-minded value of ensuring clarity with responsibility.
“And that is the general situation we have in publicly-held corporations in the United States. The ultimate legitimate source of responsibility, the owner, has been cut off from normal expression of it by the corporate veil, in order to provide protection from liability. It is then simply hijacked by the only force within the corporation that has sufficient power to enforce its claim: management.”
This is interesting particularly with respect to our being responsible not only for what we do, but also for what we own, if not legally, then at least morally.
I remember the topic being raised several times in campaigns where candidates’ ownership of certain stock was scrutinized. Gore, the “Greenhouse Effect” man himself, had Occidental Petroleum stock, and Cheney had Halliburton deferred compensation (Not that they’re the same things, but still shows that ownership implies moral responsibility, if not legal liability, in the minds of the people).
Hello Joe,
Thank you for your visit and your comments. I certainly agree that clarity is not just clear expression, but taskings infused with unmistakable authority, promoting transparent accountability.
Thanks again, and also for your terrific ongoing series on issues in the workplace faced by managers!
Hi Cam,
Yes, you are right to point out that while owners may only be able to vote with their feet, they can vote with their feet! This is an excellent angle to the discussion, one I’ve been neglecting altogether – and one that, due to your prompting, I’ll be taking up.
As for the moral responsibility of owners, though, the problem (in the context of current corporate structure and publicly-held and traded anonymous shareholder companies) is that voting with our feet (or invested money) is really all we can do. For example, if every single shareholder in the companies you name shared the environmental or political views of the people you cite, it is nevertheless not only possible, but likely that management could simply ignore them.
This is being tested, recently, with ideologically-oriented interest groups buying shares and trying to get directors on certain boards, but it is a tough and, so far, mostly losing battle.
Another aspect of this issue in the context of the current corporate legal structure is that it may further erode the efficacy of the corporate veil – that is, if managers and directors are seen to be behaving with such egregious illegality or negligence that they can be prosecuted or sued despite the veil, an age of stridently assertive activist shareholders – whether prompted by concerns regarding profit or morals – may further erode the veil, permitting owners who provoke specific acts by the firm to be prosecuted, or, even more remarkably, sued by other owners or even non-owners. This would certainly put a chill on the promotion of pools of capital and liquid shareholder markets that are key benefits of the current system, and from which the whole world has benefited greatly.
Moreover, due to numerous legal and political factors, many major pension funds are being forced to establish index investing policies. This means that their fund managers are required to invest in firms according to their proportional weight in the given index, regardless of corporate policy or influence exhibited over it by shareholders. Thus, the individuals whose retirement programs are managed by such funds lack even the ability to vote their morals with their feet.
This leaves us, hopefully, with trying to maintain the benefit of the current corporate legal structure inasmuch as it exhibits socially and economically advantageous aspects of capitalism, while attempting to meaningfully address those areas where that legal structure dangerously weakens the fundamentals of ownership which are necessary to enabling capitalism to exhibit those advantages.
This is a fascinating subject that you open up – a real tough one, as if we need more than those offered by the corporate governance conundrum. I will be getting to this – thanks again!
Great post, Jim. I especially love “unity of command isn’t so much about asserting rigid control as it is about establishing enlivening clarity.”
Thanks, Wally. That’s certainly a key component in the processes that enable execution and tie it to strategy.
Thanks for your visit!