Why companies need to become forces for good - Sumantra Ghoshal on Management: A force for good by J. Birkinshaw and G. Piramal

Sumantra Ghoshal was Professor of Strategy and International Management at the London Business School and a Fellow of the Advanced Institute of Management Research. He was the author of several books and over 100 articles and case studies. He died suddenly in 2004 while working on the role of purpose in business organisations. This volume consists of an edited selection of his most influential work.

Ghoshal argued forcibly that business should be a force for good in society, but that its potential for good was in danger of being wasted. In his view a large part of the blame for this lay with the Business Schools for promoting an amoral view of the practice of management. He called for theories of management that had stronger moral foundations.

With his colleague Bartlett he offered a new model of organization. He pointed out that over the last generation there had taken place a major change in the nature of economic activity. The typical organization of the past was one based on the logic of standardization, efficiency and in which capital was the scarce resource. In recent years financial capital had become abundant and the scarce resource had become human capital or talent. While this had become recognised by leading edge companies most large firms were clinging to traditional methods and practices that had been developed in a different era.

 The Ghoshal/Bartlett model was one in which the building blocks were the individual employees and the organization was designed around the ideas and initiatives of empowered and energized people.

Whereas the industrial model had been about strategy, structure and systems, the new model was about purpose, people and process.

As an example, a paper written jointly with Janine Nahapiet examined the concept of ‘organizational advantage’ and showed how the ‘social capital’ embedded in individual relationships could lead to significant increases in the knowledge base or ‘intellectual capital of the firm.

Referring to the lack of trust in companies and their managers revealed by successive polls Ghoshal pointed out that historically organizations lost their power and influence once they lost their social legitimacy. Regulatory measures are increasingly called for but regulation is based on the premise that managers, left to themselves are not to be trusted. Working just before his death with Peter Moran, Ghoshal was developing what he referred to a ‘good’ theory of management, using the word in the moral sense as well as meaning a valid theory.

This is essential reading for those influential business leaders who believe that companies can be a force for good. Ghoshal’s work will provide them with some very powerful arguments with which to convince the doubters.