Ethics vs. Jack Welch at the West Point of Capitalism

You may have heard about the recent so-called MBA Oath undertaken by some students at Harvard Business School.  Do click the link, it’s a short read, but to summarize it even more, it’s an oath to behave in ethically, non-selfishly motivated, socially responsible ways.

MBA Students For Ethics and Social Responsibility?

Here’s the May 30 NYTimes story,  as of which date “nearly 20% of the graduating class” had signed the oath.  When I read that, I resolved to blog about it in a week’s time.  It was clear to me on May 30 what I was going to say:

No biggie.  In my own class (1976) it wouldn’t have surprised me if as many as 10% would have signed such an oath.  That would suggest either a doubling or a 10 percentage point increase every 35 years.  

By that arithmetic it would take either until the year 2061 or the year 2114 for 51% of Harvard MBAs to agree with such controversial statements as “I will act with utmost integrity and pursue my work in an ethical manner."  Oath?  Much ado about nothing.

Well, shame on me, o me of little faith in my descendant classmates, because as of June 3 (according to the Economist’s story), that number was up to 400—roughly half, by my close-enough calculations. 

Now, half is considerably larger than 20%.  In fact, I think it’s more like 50%, though HBS MBAs in my day weren’t all that great at math (‘go hire one from MIT if you need it’ was the not-so-tongue-in-cheek phrase we heard).  And I am quite sure, as I mentally run down my list of classmates, that nowhere near 50% would have signed the oath back in the day.

Ethical Progress at Harvard Business School?

I’ve previously critiqued the ethics course at HBS  and b-schools in general for not getting it right, but this is different—as a whole, this manifesto gets it very right.

I don’t like using superlative buzz words, but the “sea change” metaphor comes to mind.  Or, to mimic Verizon’s FIOS ad, “This is big.”

How big?  Let’s contrast it with Jack Welch. 

Welch was recently trotted out from the dead to reprise his greatest hits at a Bloomberg/Vanity Fair economic forum.  It had a shot at being an intelligent economic dialogue until Jack popped open the coffin lid and shouted “buy or bury the competition!”  thus drawing loud applause from the over-60 crowd in attendance. 

Now, GE’s stock price when Welch left in 2001 was 50; it since dropped as low as 8.  Today it’s 14.  But don’t tell me that’s the fault of his (handpicked) successors; it’s what happens when a formerly great strategy meets seriously new times (and Imelt can’t work Welch’s old opaque GE Capital magic anymore).  That applause at Bloomberg  was the sound of the old guard waxing nostalgic, still hoping to believe in the old verities.  But they’re gone, gone. 

Jack Welch, Old School: Interconnected World, New School

Jack WelchThe old strategy?  Competition, competition.  Your customers and your suppliers are your competitors.  Be boundaryless–right up to  the boundary of your own company, where it becomes bury the enemy. 

The new strategy?  Collaboration, collaboration.  It’s a flat world; joint venture, alliance, outsource, teamwork, network, share.  Your customer is your purpose for being, and your supplier is your life partner.  We’ve finally gotten past Thomas Hobbes–and just in time to deal with global warming and global supply chains.

Which strategy is right for the times?  Look at Detroit; a fervent worshiper of the Competitive Gospel.  According to Welch, Detroit’s downfall was unions, pension laws and health care.

Booshwah; Detroit’s Achilles’ heel was an ideology that, unlike Toyota, pitted them against their own suppliers in an era where supply chain relationships proved the key to lower systemic costs; where one team measured "long term" in 3-year cycles, and the other measured it in generations.

Dealing with GE today is still like dealing with Welch.  They’d rather do reverse online auctions than engage in relationships.  They are shooting their own economics in the foot by declaring,  like old Bolsheviks, "we will bury you" at their fellow commercial travellers.

Me, I’ll bet on the new kids in town, who understand 1+1 >3,  and 1 vs. 1 <2; who say things like

>I will safeguard the interests of my shareholders, co-workers, customers and the society in which we operate.
and
>I will manage my enterprise in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves.

Good for you, HBS class of 2009.  I say you done us proud. 
 

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