CEO Thought Summit

On October 28, 1994, the MIT Sloan School and Price Waterhouse cohosted a roundtable discussion among CEOs, PW partners, and Sloan faculty. Walter Kiechel, then managing editor of Fortune, moderated the discussion, which focused on the organization in the year 2020 — its size, structure, leadership, and mission.

The conversation, of which we publish only a small portion, was split into three sessions. The first focused on forces of change. In the second, Sloan professor Thomas Malone presented two scenarios for how organizations might develop, and the participants reacted to them. Peter Senge, director of MIT’s Center for Organizational Learning, then proposed characteristics that tomorrow’s organizations will need to foster, and the group responded to those.

As in any lively, wide-ranging conversation, several themes emerged and reemerged in different forms, as the session progressed. Which is harder to manage, technology or people? Which matters more? Will the trend toward radical outsourcing continue, or are we learning that, by outsourcing, we lose control? Are organizations increasingly unpleasant places to work? Will the gap between the haves and have nots continue to grow and, if so, at what price?

Walter Kiechel III, former managing editor, Fortune, moderator

Edgar Bronfman, Jr., president and CEO, The Seagram Company Ltd.

Richard A. Goldstein, president and CEO, Unilever United States, Inc.

Mike Harris, chief executive, Cable & Wireless Federal Developments

Thomas Malone, professor, MIT Sloan School

Jim Manzi, chairman of the board, president, and CEO, Lotus Development Corporation

John William Melbourn, deputy group chief executive, National Westminster Bank PLC

William J. O’Brien, former president and CEO, The Hanover Insurance Companies

James Schiro, chairman and senior partner-elect, Price Waterhouse

Michael Scott Morton, professor, MIT Sloan School

Peter Senge, director, Center for Organizational Learning, MIT Sloan School

Richard F. Teerlink, president and CEO, Harley-Davidson, Inc.

Javier Tizado, CEO, Siderar S.A.I.C. – Teepetrol

Paul Turner, partner, Price Waterhouse

Session One: Forces of Change

Kiechel: Our subject this morning is the organization of the year 2020. What forces will be most important in shaping that organization?

Manzi: Technology. Microprocessor power doubles every eighteen months, and the same is now true of telecommunications speed and bandwidth. I think this combination underlies the changes that companies are experiencing.

Kiechel: Let me frame the discussion in more sweeping terms. The core infrastructure of the present industrial economy is giving way to a new economy that has at its core the convergence of computing power and telecommunications. That will introduce a change as dramatic as the changes that occurred in the transformation of the old agricultural economies in the late nineteenth century to the industrialized economy of the twentieth century. Where is that going to lead us?

Teerlink: Many of us are being dragged kicking and screaming into this new technology because we’re used to hardware, not software — but success will depend on how well we handle people.

Kiechel: Javier, you look north from the southern hemisphere. What do you think?

Tizado: We’ll have to get our people participating more. For example, we need to develop stronger in-house research and development capabilities to keep up with the competition.

Kiechel: How will we get people engaged in the organization of 2020?

O’Brien: The driving force behind the change you’re talking about isn’t technological; it’s human. People are reaching for self-respect and self-actualization. Those things happen through engagement with family or work — so the key to motivation is designing organizations congruent with those needs.

Senge: Bill is right. We tend to see technology as the driving force behind change, instead of as one enabling factor.

Kiechel: Which is more important? Technological change or changing how we manage people?

Harris: The interaction between the two is complex. In response to technological change, we’re starting to reengineer the intellectual process — for example, the way people work in teams. Overall, though, the human themes are more important than the technology. Because of instability in both business organizations and social organizations, firms today aren’t great places to work and societies aren’t necessarily great places to live. The haves and have nots are increasingly polarized, and people with disposable income have no time to spend it. That seems unstable to me.

Kiechel: Edgar, your company, Seagram, sells products to people in markets around the world. Do you see a greater segmentation of markets?

Bronfman: We’re seeing tremendous fragmentation, fewer and fewer mass markets.

Kiechel: Do you see the same thing at Unilever?

Goldstein: The fundamentals are still the same. It comes down to innovating in the marketplace. We try to stick close to our competencies and create products that consumers are prepared to pay a bit more for, which involves branding, marketing, communicating, innovating, and being a low-cost manufacturer. At the end of the day, it’s what you need to do to keep your brands first in the consumer’s mind.

Kiechel: Financial services haven’t been immune from change. What forces are driving that change?

Melbourn: The highly regulated industry we’ve lived with for thirty or forty years is disintegrating. It’s less regulated, segments are breaking down, and technology is distancing us from our customers. If a consumer can ultimately swipe a card through a scanner, dial a number, and get a loan over the telephone, how do I provide (through a 350-year-old infrastructure) the distinctive competence that makes consumers come to me?

Kiechel: Which organizations are going to be most successful?

Scott Morton: Obviously, the firms that are most nimble and most able to adapt. The serious problem I see is the growing gap between the haves and have nots that Mike Harris mentioned. Since we’re all white males here at this table, I don’t know how well we can represent those polarities, which I believe will become more extreme in the years ahead.

Kiechel: Some people say that the model of the effective organization will not be the hierarchical industrial firm, but rather the professional service firm, with networks of expertise and a capacity for knowledge building. Do you see that?

Schiro: I don’t think there’s one answer. Success will go to those who use organizational structures creatively to cope with change. You’re going to see some very large organizations and some very small ones. Those organizations that can use the new, interactive technologies to bring the customer closer will have a natural advantage.

Kiechel: What’s proven hardest about trying to foster change in your organizations?

Teerlink: Most of us grew up in a command-and-control environment, and, as much as we want to move away from that, it’s very difficult. In an old-line organization such as ours, we move a step forward, and then we move a half-step back.

Manzi: The technology issues are easy, compared to the people issues. The inertia, the difficult stuff, centers on the different nature of human interaction in a networked organization, as opposed to a hierarchical one. I think that products like Lotus Notes can help deconstruct power relationships — and we use our products before we sell them — but learning to relate horizontally as well as hierarchically is our hardest organizational issue.

Kiechel: People have talked about empowerment for five or ten years. Many organizations now call it the “E” word, with a healthy measure of skepticism. We come from a world where most of us had a mommy, a daddy — powerful authority figures. Isn’t this sort of in our genes? Can we really expect to change even if we need to?

Goldstein: North American business culture revolves around command and control. European culture is somewhat different. Europeans don’t like to be told what to do, and European managers don’t like to have to tell people what to do. They like it to happen. In that sense, empowerment might be easier in Europe. But, wherever you are, you have to make organizational culture less risk averse. We’re not good at that.

Schiro: In an agricultural economy, if a plow blade broke, the farmer didn’t wait to be told to fix it. Eventually, people also learned how to solve problems on the production line. Human beings can cope with change and they can solve problems; the concern I have is whether we’re training people to cope with the extraordinary pace of change.

Turner: Surely the problem is that we have gradually acquired knowledge and structures that no longer work. How do we unlearn the past practices? Perhaps we need an Institute of Unlearning.

Bronfman: It’s difficult to unlearn something when you don’t know what it is you’re meant to be learning. Nobody has been able to articulate what behaviors will be appropriate tomorrow.

There is also the issue of context. Our ability to cope with change has always existed within a societal context that is now breaking down. Technology has a dangerous side; it diminishes our identification with each other. We no longer get our news from Walter Cronkite, and so we no longer have, as a nation, the community feeling that he created. We are becoming a disaffected, fragmented society. It’s difficult to deal with the pace of change when values, mores, and behaviors are breaking down.

Kiechel: What are you as leaders of organizations doing to provide any of that context? Or is that up to you?

Harris: Empowerment works if you get employees engaged with the organization’s mission. The leader’s job is to define what the business is and what it isn’t, as well as what’s valued.

Kiechel: Bill, you changed Hanover Insurance quite a lot. How did you change in the process?

O’Brien: Work is both objective and subjective. We get better and better at the objective part. What has been disregarded, except in a superficial way, is the subjective nature of work — what the work experience does to the human being. Why am I working? Who do I become as a result? I believe right down to the bottom of my shoes that when organizations appreciate the subjective nature of work and they have intelligent direction, their productivity will quadruple.

We’ve got to learn to disperse power and, at the same time, maintain discipline and order. If we wind up empowering 100,000 people and we don’t have discipline, we’re going to have chaos.

Kiechel: How do you reconcile the necessity to engage the subjective nature of the worker with the necessity of keeping the organization profitable in an increasingly competitive world?

Goldstein: Bill’s comments are not inconsistent with that model. He’s saying, let the top managers set the strategy, and then push the decision making as far down the line as you possibly can.

Kiechel: Isn’t it true that information technology will undermine any attempts to centralize power at the top since everyone has increasing access to the same information?

Senge: Wait a minute. Think about the continuum that spans from data to — well, call it wisdom. We can easily share standardizable bits of information, and those get spread widely, but there’s no evidence that we can use technology to share the more refined aspects of human understanding. If we don’t make that distinction, we’ll think we’re sharing everything important. It drives me nuts when people talk about knowledge-sharing computer systems. Knowledge is in people. Knowledge is about the capacity to take action.

Kiechel: I’m a little troubled by this notion that there is something we can’t share via technology. I’ve derived just as much wisdom from reading books as I have from talking to people. Do we really believe that we will not be able to share essential learning via technological means?

Manzi: There’s a big difference between information-only systems, which is what IT automation has been for twenty years, and information as it moves into a communication-rich environment. Our fixation at Lotus is on communication as much as it is on information —putting information in motion, allowing richer forms of communication to develop around it, so that, instead of thinking about what it is — information — you think about what you’re going to do with it.

Malone: Wondering about what we can and can’t share technologically isn’t the right question. There are things we can’t share face to face, even after knowing someone for years. A question that concerns me more is “What do we want in the first place?” The most important thing technologies do is to reduce the constraints on what’s possible. For instance, we’ve been talking about centralization and decentralization. It’s clearly possible to use technology to increase centralized power or to decrease it. Which is better?

Manzi: I have to disagree with you, Tom. I think the cat’s out of the bag on centralization. Technology has made two things inevitable: increased complexity and a tremendous volume of information. As a result, it makes no sense for eight white guys at the top of the company to make decisions for 400,000 people around the world. That’s history. That can’t be done anymore.

Malone: It’s interesting to consider what kind of leadership is needed to make coherence emerge from a decentralized system. You were saying that you have to have someone at the top to set a strategy, but there are systems that function well without any centralized leader. In the scientific and research communities, coherent behavior emerges; progress occurs in genetic engineering or particle physics without anyone ever setting general goals.

Goldstein: I wouldn’t want you running my R&D program. We spend over $800 million a year on R&D. If I thought that our researchers were doing their own thing without a tie-in to corporate strategy, I’d be very unhappy and so would our shareholders.

Malone: Well, what are the alternative ways of giving focus and direction? It may not always be somebody telling you what to do. Maybe there are other ways to create a context in which the things you want to occur will occur.

Goldstein: Motivating people is no substitute for a coherent corporate strategy.

Malone: Okay, here’s another kind of system that’s very decentralized, yet out of which coherence emerges: the market. Think about the market for making a movie, or the market for transporting goods across the country. In many cases, those functions are decentralized; there are a lot of suppliers and a lot of buyers, with complex competition and negotiations. No single person is in charge, and no clear vision or control comes from the top. But somehow it all works. That’s the miracle of the invisible hand.

Session Two: 2020 Scenarios

Kiechel: The year is 2020. Greater China is the most significant economic power in the world. I am working happily as a junior parakeet tender in a bird sanctuary in Costa Rica. What does the typical organization look like?

My personal belief as a journalist is that the four most erotic words in the English language are “tell me a story,” so I’m going to ask Tom Malone to tell us a story about the representative organization of the year 2020.

Malone: A group of us at MIT are thinking about what the twenty-first century organization will consist of, and the scenarios I describe today grew out of our work. They are not predictions. They’re stories about things that may happen.

We call the first scenario “Small Companies, Large Networks.” Our goal was to carry the trend toward decentralized work a little further. We imagined a world in which there were many, many firms with only one person, and many others with fewer than fifteen people. These firms would come together in temporary combinations for various projects. Work is already organized like this for producing movies, organizing conventions, and constructing large buildings. If you’re making a movie, you put together a temporary team of lighting people, camera people, actors, a director, and so on; most likely, they work together on this one project and then disband.

We tried to imagine designing a car using this organizational system. Could a group of independent contractors design an automobile? We thought it was plausible that there would be a series of joint ventures, and also that there might be competing coalitions — several independent teams working on alternative electrical systems, for example. In the end, only one would be chosen; the others would have very little financial return for their effort. All these people would exchange information on a real-time basis via computer telecommunications.

These temporary combinations could adapt quickly to environmental changes, but they would have potential limitations. Many of the functions that large organizations fulfill today would need to be fulfilled in some other way. Who would you talk to? How would you learn things? Who would worry about health insurance? Who would think about your income ups and downs? It seems to us that these functions could be performed by organizations independent of the task structure itself —maybe professional societies, fraternities, service clubs, or unions.

Kiechel: Can anybody imagine their organization turning into a network of tiny unaffiliated organizations?

Manzi: Historically, the size of business organizations was driven by economies of scale. Now, the cost of coordinating network technology is, increasingly, the factor that determines the size of an organization. The size will be dictated by how we deal with coordination costs. And we’re making tremendous strides in deconstructing to allow coordination. But the extreme scenario — who knows?

Kiechel: Tom, could you explain what coordination means and why networking technology can substitute market mechanisms for vertical integration?

Malone: Whenever two activities interact, you have to coordinate that interaction. One way is for both activities to be part of the same hierarchy — a manager tells both people what to do. Another way is for two separate companies to contract with each other to do things that fit together. In that case, the independent parties do the coordination, without any hierarchical authority necessarily being present to resolve conflicts.

What does information technology have to do with that? If information technology does nothing else, at least it lowers the costs of coordination. The market’s biggest disadvantage is that it’s very coordination intensive. It requires, in general, more coordination to negotiate a contract and pay bills than it does to have someone inside your firm tell each person what to do. That’s very simplified, but it’s the basic argument. So, if information technology makes coordination cheaper, it decreases the market’s disadvantage. Thus extensive external contracting becomes more feasible.

Melbourn: These things are happening now. It’s not a 2020 scenario; it’s a 1994–1995 scenario.

Malone: You’re right that this isn’t radical enough. We explored the car design example partly because we thought it was provocative; since then, I’ve heard of two groups trying to use a network of independent contractors to do just that.

Kiechel: You might call this a free-lance economy. Free-lancers spend 30 to 40 percent of their time scrambling for the next project. Is this a good world to work in?

Turner: I’ve worked with a lot of highly talented free-lance people, and what’s interesting to me is that they tend to work in that mode for a year or two and then migrate back to the big-company environment. Why? They’re trying to minimize the cash-flow variations, and, more important, they want to reconnect with a professional community. They develop a sense that the tank is being drained and they need to refill it.

Senge: The world of individual craftspeople a hundred years ago might have been similar, and it worked, but the underlying social structure was reasonably coherent and stable. Our social structure is becoming more incoherent and unstable. Given that context, wouldn’t the psychological pressure on people working alone be unsustainable?

Melbourn: We’re talking about a level of fragmentation that goes against human nature. In any big city, you’ll find a Polish community, an Irish community. We herd together. Yet in the United Kingdom during the past year, we’ve lost something like 200,000 full-time jobs, and we’ve seen 800,000 people become self-employed in part-time jobs. In our organization, we no longer see the need to employ a bank cashier full-time; instead we employ two or three cashiers part-time. That’s another form of fragmentation. It will be interesting to see how we cope with the social consequences of this change, and how we learn to live with what we used to call unemployment. Europe has embedded unemployment of 8 to 10 percent. The postwar political ambition was full employment, defined as 1 or 2 percent. That’s a massive structural change and represents a potential powder keg.

Kiechel: Let me argue that social maintenance organizations won’t emerge. The world just becomes increasingly networked. Has anyone visited Microsoft headquarters? It’s a very quiet place, where everybody sits in beige cubicles, typing. On the job, maybe everyone will be doing that.

My favorite statistic on community life right now is that league bowling in the United States has radically declined in the past twenty years. People bowl individually; they don’t join a league. Are we creating a world of radical individualism?

Bronfman: Organizations in 2020 will give employees what they want — not the other way around. Traditionally, organizations have delivered what people wanted — stability, steady income, community, career advancement. Those things are breaking down, but people will figure out what they need instead, and organizations will deliver.

Manzi: The human need for affiliation won’t disappear; as social disintegration proceeds, we’ll adapt, and other forms of affiliation will emerge. Right now, there’s a kind of tribalism going on; people are affiliating with smaller and smaller groups. But this vision of sitting in a beige room staring at computer terminals — well, people will be drinking a lot more scotch if that’s true.

Harris: To change direction for a moment — the idea of organization is influenced by the dominant economic power of the day. We’ve all been influenced by the Americans and, more recently, by the Japanese. If greater China really is the major economic power in 2020, the way the Chinese do business might influence the future. We’re looking at this from a very western perspective.

Schiro: I want to go back to what Edgar said about organizations being pushed by their own employees’ desires — we see this in our organization. We’re seeing demands for lifestyle improvements. Our consultants, for example, travel 70 to 80 percent of the time; they don’t need a home-based office, and, in some cases, they don’t want one. We don’t have offices in Santa Fe or West Palm Beach, but we have people living there who get up on Monday morning, get on a plane, go off to their current client’s site, and return on Friday night. Employees’ expectations will drive a lot of this organizational change.

Goldstein: Our salespeople no longer go to a district office on Monday morning. They are held together by an information network.

Kiechel: How are they meeting their need for affiliation?

Goldstein: We still find opportunities to bring people together, but much less than when we all started every week by going into the office on Monday morning.

Teerlink: Affiliation is not just about local proximity. It is a unified organizational purpose.

Kiechel: This is beginning to sound a little like virtual affiliation.

Teerlink: We still have to make things. To make cars, for example, you still need a critical mass somewhere. Those people in manufacturing won’t have the kind of high-tech life we’re describing. Fewer people will work in manufacturing, but there will still be a lot of them.

Kiechel: If we had been sitting around this table one hundred years ago, we probably would have been talking about agriculture; we’re always going to need to raise food, we would have said. At that point, more than 50 percent of the workforce was employed in agriculture. Now it’s less than 3 percent. The number of manufacturing operatives is less than 17 percent of the work-force, which is a little less than the number of, say, Irish Americans in the total population, and, while we value their contributions, we don’t consider Irish Americans paradigmatic citizens.

Senge: I think the point of scenario thinking is not to validate or invalidate the prediction, but to think through the implications. As I think about Tom’s scenario, the question that arises is about collective rather than individual production. At Fortune, would it be enough to have a group of talented free-lance writers? Or is there a style, a collective quality of investigation and thinking that, if unshared, would make even the most talented writer incapable of producing a good Fortune article? How does that need for collective knowledge, collective capability, get addressed in this scenario?

Malone: In the car design vignette, we postulated a huge database of information on things related to the project. To get access to the database, you would have to sign a noncompete, nondisclosure agreement. Peter’s question, which is very interesting, encompasses not only how you share the task-related knowledge, but also how you share the other kinds of knowledge that create a sense of community.

Melbourn: Top management is a control factor. At Fortune, the editor chooses. He decides the shape and format of this system.

Let me go a little more deeply and crudely into this issue. As large corporations or as free-lancers, our work is about creating economic activity. We’re all here to create wealth. What drives me is a cash reward, and the prospect of a better reward in the future. And without a control —

Senge: Is that true? You’re the first person I’ve ever heard say that —

Melbourn: Perhaps I’m the most honest person you’ve ever met. I bet if you talk to your students, and they are honest, they will tell you the same thing. They’ll tell you a lot of other things in code, but cash rewards are what motivate them. We can’t get results without a control factor, whether it’s government intervention, or the editor, or the designer. I think this disintermediation will be fairly short lived, because it makes control so much harder to exert. We outsource catering, but then we have lousy food and nobody to complain to, so we bring it back in-house.

Kiechel: It’s hard to see how a world of one-person organizations will raise the billion dollars that it costs to build a fabrication plant for the latest microprocessor. Is there another scenario, Tom?

Malone: Yes. We have a contrasting scenario, which we call “Virtual Countries.” In this world, most economic activity would be performed by very large global conglomerates; these huge companies would have operating subsidiaries. There might be strong alliances, cross-ownership, keiretsu-style alliances. Because of their size and power, they would fulfill some of the functions that countries do today. These would be huge global groups of people who are bound together, not by the accident that they live in the same geographical region, but by their shared economic interests.

We assume that these huge companies would provide cradle-to-grave life maintenance needs for their employees. The company would take care of your health insurance, your education, your social networking, your reputation, your sense of identity, your community, your job security, your income. We even assume that it would be unusual for two people in the same family to work for different companies.

Schiro: You have just described something I saw at the beginning of my career in the capital-intensive mining companies of the 1950s and 1960s. If you worked for Anaconda, you went to Chile and were put into company housing. There was a company hospital. Your children went to a company school, and your wife probably taught there.

Tizado: Sometimes it depends on the environment. We have an oil field in the forest of Venezuela, and we take care of the hospital, the housing, and the supermarket. It’s a necessity.

Goldstein: That’s the pivotal point, isn’t it? If there’s no infrastructure in an emerging market, then by necessity you create one. We’ve done some of that, but we eventually decided it wasn’t what we were about. We’ve spent a decade trying to define product categories that we’re good in — I can’t imagine that we’d turn around and start providing womb-to-tomb employment and services.

Kiechel: What would it be like to work in one of these organizations?

Senge: It’s hard to see how you’d create a sense of affiliation in an organization with five million people. That’s already a huge problem with large corporations, which are, by and large, depersonalized and depersonalizing environments.

Harris: The scenario goes against the grain of what’s happening today, but I can see how it could be an extreme reaction to a perceived breakdown of social and government institutions. I wouldn’t want to work there.

Malone: I’ll add one other aspect to the scenario. We thought it might be less nightmarish, and more interesting, if we postulate that these huge virtual countries are owned primarily by their employees, and that the employees elect their managers. We would still have top-down control, but managers would be elected by their employees at almost every level. The managers would know that they manage at the pleasure of their people.

Kiechel: Doesn’t Price Waterhouse have something similar to elections? Would you recommend it as a model?

Schiro: Yes, it works for us. But, in a much larger organization, an election might turn into a popularity contest.

Scott Morton: This gets a bit tricky, because that’s what stock markets do. In theory, at least, the stock market is the mechanism we use to vote our opinion of management. I raise this point because I think we’re in danger of taking the scenarios too literally. I don’t think of them as literal at all. They’re intended to push us to think about whether there’s a trend this way or that way.

You couldn’t pay most MIT students enough to get them to work in the scenario two company, but they don’t necessarily represent the majority of working people in this country or in other countries.

Session Three: Values, Capabilities, and Leadership

Kiechel: Peter Senge, tell us about the biggest human issues we’ll have to face if we want to be around in 2020.

Senge: I find I’m less concerned about predicting what the firm of 2020 will look like than I am about developing a shared understanding of the capabilities we’ll need on the way.

When we started the Learning Center three years ago, our most radical research was in the area of dialogue. We wanted to learn to produce more reliably a kind of conversation that we’ve probably all experienced — where we suspend our normal instinct, which is to win our point, so we can end the conversation thinking in ways we didn’t before it started. We thought it was important, but we hardly thought the firms we worked with would consider it a top priority. It turns out they do. For example, we use a simple check-in technique that supports dialogue at meetings. People say, “I had a horrible morning; my teenager’s driving me crazy” or “I couldn’t sleep last night; I was so absorbed with this business problem.” The principle is simple: to converse productively, we need to know where the other person’s coming from. It’s just a technique, it’s nothing fancy. Yet in every place we’ve introduced the technique, they keep using it. That’s true of other dialogue techniques we’ve suggested.

As a result, I’m beginning to think that we have an immense hunger to reestablish the art of conversation. If so, that’s relevant to this discussion. I can’t imagine any of the changes that we’re talking about here being achieved individually or unilaterally. They will be achieved by groups of people going through significant personal changes together. Nothing sustains people going through difficult change more than their capacity to talk with each other.

O’Brien: If I had the assignment of transforming the culture in a corporation, I would spend 90 percent of my resources on the organization’s ability to converse and think. In our culture, while we’re extraordinarily good at small talk, we are deplorable at talking about serious subjects on which we have differing assumptions and opinions.

Kiechel: How do you get conversations going?

Schiro: You talk about something people are interested in. The biggest concern people have when you’re implementing change is not what it means for the company, but what it means for them. Change is their greatest fear.

Bronfman: You can’t have any kind of conversation when people are afraid, and in many organizations, fear is ever present.

Kiechel: One can understand why an employee would be fearful. The Fortune 500 industrial corporations have shed about one job of every four since 1979. How can you drive out fear in that kind of climate?

Melbourn: I don’t think you drive it out. You can help people to come to terms with it. The most important part of doing that is listening to what people are saying to you.

Manzi: Lotus has been in business for only twelve years, but we’ve already gone through multiple right-angle turns. There’s an enormous need for the senior management team, and especially the person in charge, to model behavior. The single most dysfunctional thing in organizations is when people abuse their authority. If you allow that kind of behavior to occur, fear will exist and the process will derail. Don’t just tell people what’s expected; model it.

Senge: The gap between what we espouse and what we produce can be immense. It’s darned hard to find somebody opposed to open communication. We need to dig a little deeper and ask, Under what circumstances do I derail? What assumptions do I hold that, when looked at a little harshly, are contrary to open communication? For example, do I think I know what’s going on? When top managers describe reality — what they perceive as reality — with an air of certainty and authority, they create an incredible mantle of ineffectiveness, because everyone then looks up to them to solve the problems, to do the thinking.

That’s an example of the kind of deep assumptions we all have; unless we bring those to the surface — well, this stuff all sounds nice, but nothing much will change.

Kiechel: What values do organizations need?

Harris: I don’t think a generic set of values applies to all organizations. Some, like integrity, are universal. Apart from that, the organization needs to align values with the direction and mission. The generic values at Mercury, my company, are communicating openly and treating people with respect. The nongeneric ones are innovativeness, speed, and teamwork.

O’Brien: For most corporations, the roots of their values are the opposite of the diseases infecting their cultures. Once you’ve identified those diseases, you’re not going to invent a new value. You’re going to return to the fundamental truths that are part of any religion.

Kiechel: What does each panelist think about most when looking ahead?

Melbourn: How do I keep my feet on the ground? How do I remember my traditional values? And how do I take the 90,000 people in my workforce with me?

Scott Morton: In twenty years, the world will be a vastly different place. I’m impressed by the size of the gap that we have to cover getting from here to there.

Goldstein: Historically, we’ve done a great job of growing and training managers within our organization. We have a more difficult time growing leaders. Leadership is intertwined with integrity, character, and sound judgment. If we can recruit and keep people with those basic values, we won’t have anything to worry about.

Senge: I believe our industrial system today is committed to mediocrity. In every organization I’ve worked with for more than a couple days, everyone realizes how much baloney is going on. There’s always a deep sense of frustration. I think we mask all that with rhetoric about the need to change and the commitment to profits. It’s a bunch of nonsense. Results are about three or four down on our priority list, not in rhetoric, but in fact.

Bronfman: Any company has two assets: its products and its people. Firms spend far more time worrying about the first than the second. I believe that the future CEO will understand that employees are the issue. People will deliver if the values, vision, and system of governance allows them to contribute.

Schiro: Our product is intellectual capital. We have to create an environment that attracts and nurtures talented people, so that we can help our clients anticipate and adapt to change.

Manzi: I am deeply motivated both by what we do as an organization and by what we are bringing to the marketplace. My two biggest fears are, first, not being able to maintain a balance between what I do for a living and what I do with the rest of my life, and second, that I don’t know what I don’t know.

Teerlink: People are our only long-term competitive advantage. Unfortunately, we in leadership positions end up being major barriers to their contribution. The challenge we have is to get out of the way.

Malone: My biggest hope is that we will figure out how to invent organizations that are fulfilling a wider range of values than purely economic ones. My biggest fear is that our desire for other kinds of fulfillment will be subverted, or diverted, by hypocrisy.

Tizado: My big worry is how we can keep increasing productivity without introducing unemployment. We have to create new business to do that in order to protect the stock of knowledge that we’ve built in our organization.

Turner: I’m struck by the gulf between the rate of technological progress and the rate of progress in organizing our human resources. I think that comes back to the critical difference between management and leadership. One is a constraint, and the other is an evolution.

O’Brien: I’m driven by the need to design organizations around values so that we can achieve two things: disperse power but maintain order and discipline, and bring the moral culture down through the organization to the front line. My fear is similar to Tom Malone’s — that the value-based culture gets turned into some kind of snake oil.

Harris: Two issues come to mind. The first is getting the right balance between driving full-potential performance and making sure the company changes as the industry changes. The second is more personal. I think we’re making organizations into more and more unpleasant places to work. I don’t think that’s sustainable. I hope the whole shooting match doesn’t collapse around our ears.