Richard Straub, President of the Peter Drucker Society Europe, referred to the participants of the conference as essential components in an engine of change, driving towards new and better horizons, both socially and economically.
He later quoted Winston Churchill in his opening comments, in which he spoke of capitalism as ‘ the worst form of economic system, except all the others that have been tried’.
This statement very much set the tone for the two day event, and implied that rather than deconstructing the current capitalistic systems, where the hedge fund and investment of firms of Wall St ‘ruthlessly and often irresponsibly fight to game the system’ (Roger Martin, 2012), most power figures in business believe the best tactic to be improvement of this economic approach, tweaking the rules, tightening loopholes and creating value on various levels.

It would seem that the message voiced by a number of young people in attendance, suggested that if joblessness is the end-product of higher education, the institutions that provide the programmes of supposed ‘learning’ shouldn’t be surprised if students choose to find their own tailored methods of development and focus their efforts towards more personally interesting and beneficial activities. The need to be resourceful and proactive has never been of such significance.

The Global Drucker Forum raised a number of points that are strongly cohered to the activities of ThinkYoung. Lynda Gratton, of the London Business School, referred on multiple occasions to the European wide issue of youth unemployment and touched upon the skills mismatch phenomenon, an issue that leaves many employers deficient of suitable candidates. Tammy Erikson, of Erikson Consultants and Dan Shechtman, of the Israel Institute of Technology, further spoke of the fear of Entrepreneurial Failure as something we should see as a concern, and in addition, highlighted a number of stigma points that should be better acknowledged and combatted in this continent. To supplement this, Dan Schechtman identified an imperative need to teach ‘real’ physics at kindergarten level, explaining that Europe must embrace a scientific mind-set to foster future technology entrepreneurs.

Skills Mismatch is currently a topic of real interest because of economic stagnation and soaring unemployment rates. It is defined as the gap between an individual’s job skill’s and the demands of the job market.
ThinkYoung recently launched a pan European survey of the skills mismatch phenomenon as a portion of the ‘Our Future Mobility Now’ initiative, a project realised by the European Association of Automotive Manufactures. This study involved 868 respondents from 48 different countries, encompassing 16 different languages, and produced a number of conclusions very much interrelated with thoughts of the Drucker Forum: http://thinkyoung.eu/overcoming-the-skills-mismatch.

For 2013, ThinkYoung are launching a ‘Failure Campaign’, consisting of a survey targeting young individuals in 4 EU member states, an accompanying documentary; and will be collaborating with a San-Francisco based initiative in the organisation of the first European Failcon – An event bringing together technology entrepreneurs, investors, developers and designers to study their own and others’ failures and prepare for success.
We want to convey the message that failure is acceptable, but standing up and rediscovering entrepreneurial drive is compulsory. I particularly like the notion that a failure should be called a ‘Nearling’ (21lobsterstreet, 2012), in the sense that you always learn from things that are not entirely successful, but are pursued initially with the correct intentions.

In response to the perceived deficiency of Entrepreneurial spirit at European level, ThinkYoung has taken action to combat this, hosting two consecutive entrepreneurship schools for those individuals who are interested in startup yet lacking the self-confidence and knowledge to move forward. In direct complement to this, whilst speaking in Vienna, Hongjun Wang, founder of TAOTPR ‘The Art of Taking Personal Responsibility’, highlighted the need for people to take control of their own development, defy the norms and constraints placed upon them and enter into the unknown in search of personal gains and professional growth.
Whatever goals one may have, the 2012 Global Peter Drucker Forum has began to aggregate a critical mass of business power figures, that not only focus on providing maximal returns for shareholders, but share inspiration to create social value, engage in philanthropy, demonstrate passion and think in an unorthodox fashion to pursue different avenues in search of multi level prosperity.

In my TEDx talk in Oslo last month, I explained in more detail why the transition to Management 2.0 is not merely desirable: it is inevitable.

In the talk, I examine the epic shift in power in the marketplace from the seller to the buyer, that flows from Peter Drucker’s foundational insight in 1973: “There is only one valid definition of business purpose: to create a customer.”

The shift in power has had devastating consequences for hierarchical bureaucracies, which have been insufficiently agile to cope with the more dynamic marketplace. They have experienced steadily decreasing returns on their assets and on invested capital.

By contrast, firms such as Apple [AAPL] and Salesforce [CRM] that have focused totally on delighting the customer have been hugely profitable.

Management 2.0 amounts to a paradigm shift in the strict sense of the phrase as used by Thomas Kuhn: a new mental model of the world and how management operates within it.

Because it generates markedly superior profitability as well as a more satisfying workplace and a more congenial experience for customers, the question is not whether it will happen, but when.

A full transcript of the talk is available here.

AUTHOR:
Steve Denning’s latest book is The Leader’s Guide to Radical Management (Jossey-Bass, 2010). It describes management principles and practices required to reinvent management to promote innovation and adaptation. He is also the author of The Leader’s Guide to Storytelling (2011) and The Secret Language of Leadership (2007). His website is www.stevedenning.com and his Forbes column on radical management is at http://blogs.forbes.com/stevedenning/.

Until roughly fifty years ago, there was a tacit understanding between employees and corporations:  If employees worked hard and demonstrated loyalty to the company, the company would reward them with a steady career and comfortable retirement.  This equation had been at the heart of the relationship between individuals and organizations throughout centuries of Western economic tradition.

One side of the equation began to erode in the 1970’s as companies chipped away at the security and guaranteed payments they offered.  Decades of lay-offs, downsizing, and reduced benefits later, we all know that loyalty and hard work will not guarantee a job for life nor a comfortable retirement.

However, despite the obvious erosion, many of our talent management practices and behaviors are still predicated on this tacit agreement.  It is the disconnect between the philosophy reflected in our formal policies and the reality of our personnel actions, between what we say and what we do, that lies at the heart of employees’ sense of unease.  Bottom line:  the organization should not implicitly promise protection and care that it realistically can’t and won’t provide it.

The implicit promise is still conveyed today through talent management practices that tie employee interests to long-term service:  pensions, tenure-based perquisites of any type (amount of vacation, for example), training and development investments that are focused primarily on youthful new hires (with the expectation that they will pay-off over a long period of time), and internal promotional ladders based on tenure.  These vestiges of organizations’ former commitment to long-term protection and care aren’t consistent with today’s reality.  They just don’t make sense.

Many times managers feel compelled to convey messages about organizational stability (“no more lay-offs”) that the listeners – and probably the speakers themselves – don’t believe.  These well-intentioned managers are trying to restore the old equation – but, in reality, are further decreasing trust by amplifying a tone of unreality.

And, while companies no longer promise long-term protection and care, leaders have been slower to acknowledge that this lessens the employees’ obligation for loyalty.  Many still expect an expression of unwavering loyalty.  The practice of immediate dismissal upon acceptance (or, in some cases, exploration) of another job is still common in many firms.

The mismatch between what we all intuitively know and our talent management practices and leadership messages are at the heart of the lack of trust.  Restoring trust requires establishing a new, realistic relationship – one both sides believe – translated into talent management practices and leadership behaviors that reflect that new equation.  Trust only breaks if you promise something you can’t or don’t deliver.

I believe the new equation will be an adult-to-adult relationship between organizations and those who perform work.  Organizations should expect that everyone who shows up to work will be fully present, engaged, and have the relevant skills to do the job at hand.  Individuals should expect the opportunity to choose interesting, challenging work, suited to their skill set, and to be compensated through fair, transparent arrangements.

Talent management practices that provide individuals with more choice in their work arrangements will be central to this shift.  Already progressive companies are beginning to focus on measuring results, while leaving the choice of when and where to perform the work to the individual.  They may specify the desired outcomes and principles under which the work should be performed, while leaving the exact approach to the discretion of the individual.  Others are breaking work into projects and giving employees options about the type or intensity of project they’d like to take on next.  Some are creating menu-based work arrangements.

Technology is making it easier and less expensive to find the individuals with skills or knowledge well-suited to the specific task at hand.  The value of longevity will decrease as matching the right person with the right task will be made much simpler.

This shift will be a win-win in more ways than one.  Openly reflecting the reality of today’s employee-employer relationship – telling it like it is – is what’s needed to restore trust.

But, beyond that, I believe the new relationship is more appropriate for the levels of collaboration and innovation required today.  Employee loyalty, whether to the organization overall or to the individual boss, can lead to conformity and dependence, rather than a sense of exploration and innovation.  It can foster protectionist competition, rather than a willingness to share ideas broadly.

And the new relationship fits better with the expectations of younger employees.  Gen Y doesn’t pretend to be loyal. They don’t expect one company to provide long-term care.   The equation they care about is one that gets them excited in the immediate task.

Finally, we can’t overlook changing the metrics of success.  The assumption that longevity is important has caused organizations to optimize around lower transaction costs (hiring, firing) rather than finding the person with the best possible skill for the specific task at hand.  New measures, along with new talent management practices, will create trust in a new relationship to stand the test of this century.

AUTHOR:

Patagonia has a perverse dislike of selling more products. When at a recent strategy meeting, his executives asked founder Yvon Chouinard what he thought about their plans, he responded – according to his lieutenant Rick Ridgeway – “I’m kinda worried that you’re training all those consumers out there to buy a bunch of shit they don’t need.”

At the other extreme is Jack Welch, ex-CEO of General Electric, whose tenure was marked by GE’s uncanny ability to hit year-on-year growth targets. GE’s mantra was shareholder value: to keep investors happy, it did everything possible to meet their expectations for consistent growth.

Then, in 2009, less than two years into the credit crunch and the worst financial crisis for generations, Welch recanted. He told the Financial Times: “On the face of it, shareholder value is the dumbest idea in the world.”

Chouinard and Welch could not be more different – one, a laid-back hippyish adventurer and the other, a turbo-charged golfing super-executive.

Their companies look pretty different, too. Patagonia has just become a “benefit corporation”. This is a new corporate form, available in California and a growing number of other US states, that obliges companies to take account of non-financial interests, such as social, environmental or community objectives, as well as shareholder demands. GE was and is a stock market bellwether.

Yet I don’t believe Patagonia and GE’s objectives – or the challenges they face – are as far apart as they look.

Yvon Chouinard even had his own revelation – like Welch – at a critical point in the company’s early history when a consultant pointed out to him that his best course of action would be to sell the company for $100m and spend the proceeds on environmental causes. Instead he decided “the best thing I could do was to get profitable again, live a more examined corporate life and influence other companies to do the same”.

I think both companies recognise they need to ensure – out of self-interest, in the interests of others, or through a mixture of both – that they continue to grow and that their growth should be “good” – or at least as good as it can be.

Two conditions are essential for good corporate growth: it should be for the long term, and its benefits should be shared. Even quite large companies are subscribing to these objectives.

Jack Welch’s reversal represented a partial and belated recognition that the pursuit of short-term financial targets had helped contribute to the financial crisis.

Most chief executives I talk to want to get off this treadmill. Cynics may say that they simply want to avoid the scrutiny of owners, who have a habit of sacking chief executives who underperform, and continue taking away big pay awards. After all, telling the shareholders that you only want to be measured by what happens over a three-year period, rather than a three-month one, gives you an extra two years and nine months before you’re found out.

But I think there is a growing realisation that “sustainability” is far more than a box into which companies put their environmental and social responsibility initiatives and then forget about them so they can get on with boosting profits. “Sustainable growth” is really the only way that companies can ensure their survival.

This concept is being taken far beyond the company itself. Large corporations are realising that by expanding their responsibility beyond that of their own narrowly defined self-interest they can actually create fertile conditions for their own future prosperity – and that of their customers and shareholders.

Michael Porter, the Harvard business academic, and his business partner Mark Kramer called this “CSV” – “creating shared value” – to distinguish it from allegedly old-fashioned CSR, or corporate social responsibility. They have even written that this approach constitutes a “higher form of capitalism”. But how the concept is marketed is less interesting than what it consists of, from Hindustan Unilever’s “Shakti” network of poor female entrepreneur-distributors to Vodafone’s mobile banking service in Kenya.

Do companies boast about these projects for PR effect? They do. Will all of these initiatives endure? They will not. Like all markets, these new ones could eventually become subject to diminishing returns. Investors may choose the higher return available elsewhere – pursuing “bad growth” and “lower forms” of capitalism.

While Unilever is reaping the plaudits of Harvard professors, it has not yet answered adequately the question of what will happen if and when its underlying profit starts to falter, its share price slips, and investors start to demand whether such projects aren’t simply too costly.

I’m under no illusions that it will be hard to harness growth to goodness – even for companies with the best intentions.

Later during my California trip, notwithstanding Yvon Chouinard’s warnings about not buying unnecessary items, I went shopping at Patagonia’s Santa Monica branch. Having duly agonised over whether we really needed the item in question, I paid and handed over my contact details, including an email address. Every week since then I’ve received at least one, sometimes two, messages from Patagonia urging me to buy more from their online store.

But it seems to me churlish to attack efforts to grow “well” just because they come from corporate entities. Growth increases average incomes but that average increase can conceal vast inequities and widening income gaps. These companies have recognised not only that growth is good – that’s a treadmill no chief executive wants to step off – but that “good” growth benefits the community and the corporation and contributes to the long-term sustainability of both. That has to be worth encouraging.

AUTHOR:

Andrew Hill is an associate editor and the management editor of the FT. He is a former City editor, financial editor and comment and analysis editor. He joined the FT in 1988 and has also worked as New York bureau chief, foreign news editor and correspondent in Brussels and Milan. Andrew was named Commentator of the Year at the 2009 Business Journalist of the Year Awards, where he also received a Decade of Excellence award. This blogpost is adapted from his speech to the seventh William Pitt Seminar – “What’s so good about growth?” – organised by Pembroke College, Cambridge.

Next April, a group called Conscious Capitalism expects to draw some 1,500 people to San Francisco to explore how companies can “adopt a higher purpose that transcends profit maximization.”

And in between, hundreds will convene in Vienna on November 15 and 16 for the fourth Global Peter Drucker Forum, which will examine how business can become, as Unilever Chief Executive Paul Polman (one of the forum speakers) puts it, “a force for good.”

As I’ve watched these events come together-and heard similar notions about rethinking capitalism from David Cooperrider (Business as an Agent of World Benefit), Michael Porter (Shared Value), Dov Seidman (HOW) and others-I’ve felt buoyed by each of their visions.

And I’m sure that Peter Drucker would have felt good about them, too. He believed, after all, that the best corporations “define an organizational purpose that goes beyond next-quarter financial results and goes beyond maximization of shareholder wealth.”

Still, deep down, I have to admit that I’m struggling to understand the import of it all: Does this flurry of activity add up to more than a bunch of scattered conferences and white papers? Are we actually witnessing the beginnings of a social movement?

On one level, it is tempting to say yes. Indeed, it seems only natural that there would be a vigorous backlash to the myopic, financially focused mindset that triggered the financial crisis and Great Recession.

But there’s another part of me that remains skeptical. How can this disparate array of conferences and articles coalesce into a single force? If this is a genuine movement, where is it’s center? What will spur coordinated, collective action-what de Tocqueville called the “knowledge of how to combine”?

“The unique event of Rachel Carson’s book Silent Spring . . . changed the attitude of a whole civilization toward the environment,” Drucker noted in Management: Tasks, Responsibilities, Practices. Where’s our Silent Spring for fixing capitalism?

Social movements build in stages, and it is possible, of course, that we are early in the evolution of-what does one even call it?-the Purpose-Over-Profits Movement.

Yet it is also possible that what so many of us feel passionate about won’t amount to much in the end, that all of our teeth-gnashing over short-term-itis and corporate irresponsibility will prove ineffective, much like the protests against globalization that took place in the late 1990s. “So far, these protests have no focus,” Drucker remarked in Managing in the Next Society. “They are protests against ‘the system,’ whatever that means.”

We should have no illusions that “maximizing shareholder value” itself became a movement-a key part of “the most successful intellectual movement” in law and economics circles in the past 30 years, in the words of Johns Hopkins University’s Steven Teles.

Countering it will take a movement of our own. How-and even if-we successfully nurture one remains to be seen.

AUTHOR:
Rick Wartzman is the executive director of the Drucker Institute at Claremont Graduate University and a columnist for Forbes.com. He is the author of What Would Drucker Do Now? (which is a collection of his columns) and two books of narrative history: Obscene in the Extreme: The Burning and Banning of John Steinbeck’s The Grapes of Wrath and (with Mark Arax) The King of California: J.G. Boswell and the Making of a Secret American History.

To do this, corporations have to address three questions: how is leadership ensuring there is sufficient inner resilience to take the corporation through these turbulent times? What is the corporation doing to positively anchor itself in its neighborhood and supply chains? And what role is it playing in solving global challenges such as climate change, endemic youth unemployment, and inequality?

Some leaders are already stepping up. When Unilever’s CEO Paul Polman committed to significantly reducing the environmental footprint of his corporation, he was making a purposeful statement about climate change. When Danone’s CEO Franck Riboud committed over seventy million euros to the Danone.Communities project, he was making a purposeful statement about the role of the corporation in society. When the CEOs of Indian IT giants Infosys, TCS and Wipro built a host of ways to educate Indian children, they were making a statement about their role in India.

These role models are crucial. We need to see more – and at scale! Corporations are unique as institutions in having extraordinary access to the most talented minds from across the world, and in having the innovation processes to bring these minds together in the most productive way. Many have honed their scaling and mobilization capabilities in a way that is far superior to governments and NGOs. Some have become adept at forming global alliances, even with their competitors.

These precious competencies – innovation, scaling and alliances – are crucial to solving global challenges. In the past, it may have been appropriate for corporation to use them in the service of their financial stakeholders, but this is no longer appropriate. The same forces of technology and globalization that have enabled corporations to prosper in the last decades have also brought forward profound global challenges. Those corporations that will prosper in the future will do so because their shareholders, consumers and employees see their leaders describing and living a greater purpose. This is a purpose that sees the role of the corporations not only from the ‘inside’, but also from the ‘outside’, in its neighborhoods and supply chains, and in an increasingly global context.

Corporations must be less precious about their precious competencies. Without an outer focus, those who are taking to the streets to demonstrate against corporations may find more people joining them, and more to be angry about.

AUTHOR:

Lynda Gratton is Professor of Management Practice at London Business School and is the founder of the Hot Spots Movement. She has written seven books and numerous academic articles and is considered one of the world’s authorities on people in organizations.

In 2011 she has been ranked by The Times as one of the top 15 Business Thinkers in the world today and in 2008 The Financial Times selected her as the business thinker most likely to make a real difference over the next decade. She was also in the top two of the Human Resources Magazine’s “HR Top 100: Most Influential” poll, and this year Lynda was number one of Human Resources Magazine’s “Top 25 HR Most Influential UK Thinkers 2011” poll.

Lynda’s full page biography can be found here.

There is no doubt that the cult of shareholder value produced perverse results. The fashion for linking remuneration to share prices allowed bosses to manipulate their shareprices to boost their income. The emphasis on short-term results rather than long-term health tempted companies to skimp on research and innovation (‘long term results cannot be gained by piling short-term results on short-term results’ Peter Drucker once remarked). There have been so many examples of the destructive side of share-holder capitalism that many of its high-priests have turned against it: even Jack Welch has pronounced that it is ‘the dumbest idea on the planet’.

But there is a danger of going too far in the opposite direction. None of the alternative systems of measurement that people have come up with are very compelling. One idea is ‘customer satisfaction’. But isn’t the best way to please customers to give everything away for nothing? And how can customer satisfaction take into account the interests of the people who risk their capital by investing in the company? Another idea is to rely on the judgement of managers. But isn’t this tantamount to allowing children to mark their own homework? It is odd that people who worry that shareholder value has been manipulated by managers for their own benefit should argue that managers should be given more power rather than less.

Most critics of ‘shareholder capitalism’ embrace ‘stakeholder capitalism’-that is a variety of capitalism which gives equal say to all the various constituencies in the business world from employees to communities. But this can easily become a recipe for all sorts of problems-from dithering as different constituencies manoeuvre for advantage to gamesmanship as clever managers manipulate gridlock for their own advantage. The stakeholder idea might have had some merit in a world where technological change was slower than it is today. But it has little relevance to a world where innovation is frequently disruptive and managers have to make unpopular decisions or miss the next wave.

The best way to deal with the issue of shareholder value is to reject the absolutists of both sides-the Calvinists of shareholder value and the Jesuits of stakeholder value as it were-and take a much more pragmatic approach. Shareholder value is a valuable tool. It provides us with a way of measuring a company’s performance from the outside. But it is an equally bad master. The trick is to adjust the tool so that it does the job better rather than to caste it aside.

This can be done relatively easily-by making sure that we focus on long-term rather than short-term shareholder value. Bosses should be forced to hold their stock in companies for a few years before they can exercise their stock options. They should also be deprived of their freedom to exercise their stock options whenever they feel like it. This will give bosses a powerful incentive to boost the long-term health of the company (and hence the long-term health of their own portfolios) rather than a perverse incentive to game the system.

AUTHOR:

Adrian Wooldridge is The Economist‘s management editor and writes the Schumpeter column. He was previously based in Washington, DC, as the Washington bureau chief where he also wrote the Lexington column. Previously he has been The Economist‘s West Coast correspondent, management correspondent and Britain correspondent. He is the co-author of “The Company: A Short History of a Revolutionary Idea”, “A Future Perfect: The Challenge and Hidden Promise of Globalisation”, “Witch Doctors”, a critical examination of management theory, and “The Right Nation”, a study of conservatism in America. His most recent book is “Masters of Management: How the Business Gurus and their Ideas have Changed the World-for Better and for Worse”.