In the course of my professional career as an entrepreneur I have come to know a great variety of social and economic systems. Both the successes and the failures that I have encountered in the process have made me aware that, given the dramatically different conditions that now affect people's lives, it is high time to develop new goals and new approaches. Any future order of things, however, can endure only if it is in accord with humane principles and, above all, with the very different way in which people now perceive themselves.
If we are to develop new aims and objectives for the future, there is relatively little to be gained by looking back at the past. In our present circumstances it is more a question of using our creativity, our powers of judgment, our ability to give shape to things, in order to discover a new and appropriate path. It seems to me that the entrepreneur has the best qualifications for this task. For in order to succeed, entrepreneurs have always been compelled to adapt to people's wishes and to respond rapidly to change. The competitive world of the market economy tolerates neither dogmatic systems nor forms of behavior that run counter to the essential nature of mankind. To give one example of the very different circumstances in which we now live: In earlier days, it was obligatory within the context of the state to preserve traditions and stick rigidly to rules and regulations. Since progress in the sense of steady change did not yet figure among society's aims, the sole criterion for judging the work of public servants was its "orderliness." In our present age of global competition between different systems, however, this "orderliness"--in other words, this dogged adherence to outdated habits--would be a dangerous error.
Since time immemorial, the production of goods and services has been organized on the basis of the division of labor. The interchange of supply and demand used to take place in the "marketplace," or at any rate via the "market," this exchange process being made considerably easier through the introduction of money.
Supply increased in scale and range as a result of the development of science and technology, while the market expanded due to burgeoning competition and the growth of advertising. Then improvements in communications and transportation allowed the once purely regional market to broaden into the global market of today.
Politicians, however, were relatively slow to grasp the importance of the market for people's standard of living and their general sense of contentment, and for this reason it was long believed that national sovereignty could also be extended to include the economy. Today, however, all the most important national markets have open borders. They have opened themselves up to a free and global exchange of goods.
OUR CULTURE IN A STATE OF FLUX
The good old days in which almost everything followed a well-established pattern have long gone. Today, differences of opinion regarding aims and methods lead to serious arguments and bitter disputes on a global rather than a merely regional scale. The body of shared values that a society must have in order to remain a coherent community is in tatters. International cooperation is bedevilled by egotism, dogma, and the thirst for power, factors which have not infrequently resulted in chaos marked by conflict, severe hardship, and misery, and have even led to the collapse of the relevant country's political structures. Those in positions of responsibility must therefore come to realize that the premises and rules enabling people to live together in a truly humane way and to enjoy a stable social order have fundamentally changed!
Already in the twentieth century change was taking place with unprecedented speed. But it will become even faster due to the increase in knowledge and its ready availability! Whereas people in earlier ages developed their culture on the basis of traditions that all had experienced, we in our current process of change have not managed to bring the various international social orders into harmony with one another. In earlier periods of civilization, social systems were directly determined by the ruling elite with their own particular experiences and their determination as the key influences, and they sought to achieve their ends by instituting hierarchical structures. Even value systems, so indispensable to the life of any community, were laid down by those in power entirely at their own discretion! So long as such systems were able to prevail, those in power had no incentive to change. On the contrary, since change of any kind always appeared to harbor risks as well as possible benefits, what mattered was to strive to maintain the status quo--especially by fostering tradition. To those in power this manner of organizing society seemed most likely to guarantee a lasting and secure state of affairs. As to what might be in the best interests of their subjects: they never gave it a thought.
In China, for instance, this kind of rule continued for very long periods of time. However, it presupposed that any external or internal impetus for change could be resisted--something that was largely achievable in China thanks to its geographical situation. For the nation's subjects at that time, issues such as "dissatisfaction with their standard of living" or "the demand for progress" simply didn't exist.
In Europe, on the other hand, the dominant groups in culture and politics did not always manage to achieve a comparable degree of durability. Indeed it was a particular feature of European countries that they found themselves caught up in an ever accelerating process of political, economic, and social change, and had to try to survive in the face of constant threats and great instability. Repeated attempts to ensure continuity by establishing dynasties and imposing sociopolitical dogmas of one kind or another increasingly failed because of the inadequate leadership skills produced by such systems.
AN AGE OF NEW POSSIBILITIES
Today, technical progress and the general increase in knowledge allow people to aspire to a better standard of living and to demand more freedom to shape their own lives in the way they wish. The question of how to realize these goals, however, is the subject of constant and heated discussion on all sides--though these controversies are frequently characterized by self-interested political maneuvering on the part of the various social groups, who thus display a lack of objectivity and fairness. But let us console ourselves with the fact that it always takes time to fashion a new culture--and this applies equally to the current state of development of our own democracy and to the process of modernizing Germany's economic system!
In the meantime, the bad experiences of the past few decades--and also their successes--have taught us that quality of leadership is the key determinant of success in all areas of life. It is no doubt regrettable that this knowledge has not yet made sufficient impact on the way our current systems are evolving, but we should nonetheless take care not to be premature in seeking to enshrine new social and political systems in law, for we in Europe are currently in a very good position to see just how problematic dogmatism and inflexibility really are.
What we do need now, on the other hand, is full acceptance of the European Union, and the ability to develop effective management methodologies that make it possible to delegate responsibility downward, and to spark new impulses from these lower echelons. In trying to bring this about, we need to bear in mind that the top echelons in the various organizations making up our society lack the requisite competence, and are therefore hopelessly overstretched and incapable of succeeding in their task. The impetus for reform is therefore very unlikely to come from this quarter. Our reflections on these matters may well receive considerable stimulus from the example of progressive large companies, from the example of democracy and the political involvement implicit in its form of civil society!
BRINGING MANAGEMENT METHODOLOGY UP-TO-DATE
In undertaking this task of developing a new management methodology we must not let ourselves be seduced into paying undue attention to regional or group-specific interests and hence producing solutions that are not designed first and foremost to benefit the majority. Since in Germany, too, sheer size and power still play a dangerously large role, those who run the various organizations within our society must abandon their dogged adherence to established hierarchical positions. This is a path that leads nowhere, and the failure that it would unquestionably result in could well prove disastrous. Monopolies are not a good thing either in the economy or in society as a whole!
The impetus for accomplishing the necessary reforms will probably not come from the realms of politics or academia, nor will it come from those now in power. It will come instead from people who excel in independent thought, creativity, and community spirit. To put this another way: It might well be that by developing a decentralized civil society we shall arrive at the kind of management methodology that we need in order to have leaders and managers in politics and the public service who are genuinely suited to their functions and are capable of learning new things.
The learning process will presumably happen more quickly in the private sector, since greater pressure is exerted here by the realities of competition. Businesses with outdated hierarchies or wrong goals--an exclusive focus on maximizing profit, for example--cannot unlock the flexibility, commitment, and creativity in people that today's circumstances demand. Speaking generally, we can say that large concerns--and I include the apparatus of the state here--will have a much more difficult time handling these reforms than medium-size businesses will, since in large state organizations any form of management involving creativity and enterprise is for the most part deliberately reined in to minimize risk, and to ensure that all staff achieve similar levels of performance.
Attempts at the political level to balance the different interests within society, and the antagonistic discussions between the representatives of the various groups involved, have considerable consequences for the economy given the very diverse conditions under which it has to work--but scarcely any attention is paid to these consequences. The politically attractive goal of "equality" is inappropriate to the economic realm in terms of both issues and people. The government dreamed up the idea of "round table" discussions--on the labor market and the health system, for instance--but this initiative, too, has largely failed to impress. After all, it doesn't begin to tackle the real causes of the ever more apparent mess in which we find ourselves, for those involved think that with the backing of the country's political leadership they can push the "right" solution through, without regard to the very different objectives involved or the necessary financial room for maneuver. People will soon have to realize, however, that even when it comes to the general good, there are limits to what is possible. It should already be giving us pause that the figures both for productivity growth in the German economy and for Germany's gross national product are looking increasingly poor in comparison with the rest of Europe!
It is perhaps only by looking at the practice in other countries that we will come to realize that the many interventions on the part of government on the one hand and employer/union negotiating bodies on the other do not improve workers' pay, benefits, or living conditions in the public or private sector, but in reality worsen them. And perhaps we will also realize that entrepreneurial management and the performance-orientation principle still represent the best available management methodology--and one that is gravely damaged by constant state interventions! We should also recognize that the "culture of conflict" that is considered such a laudable feature of a parliamentary democracy constitutes a seriously disruptive factor within the economic sphere with its success-oriented objectives. In today's businesses with their necessarily highly decentralized structures, the worst thing one can do is to undermine the motivation of the workforce, as this makes it impossible to operate a decentralized, entrepreneurial management system--a system based on motivation, creativity, and commitment, and the only one capable of handling a task that will become ever more difficult as time goes on. What we need are people willing to commit themselves to their particular company with all their creative talent--and we need this kind of commitment at every management level. We must accordingly strive to maximize people's motivation, and we must see to it that they identify with the goals of their organization. But if we practice a culture of conflict in the private sector then we achieve exactly the opposite effect!
Adversarialism has its place within a democracy. But management of any enterprise that is performance-driven and subject to competition needs a workforce willing to cooperate and to identify with the organization and its aims. What it does not need is a culture of conflict! So far as the public sector is concerned, it would almost seem as if we had learned nothing from the failure of the centralized planned economies in the socialist countries. Even the countries of the Third World have meanwhile shown a better understanding of the implications: they are putting their faith in competition, individual initiative, decentralization, and entrepreneurial creativity. We, too, should say good-bye to old habits of mind. Though it is true that to do this we need detailed knowledge of the relevant field, sincerity, and the courage to implement reforms!
NEW GOALS FOR THE STATE, NEW GOALS FOR THE ECONOMY, THE PATH TO NEW GOALS
The original aim of the economy, namely to meet the population's needs in respect to goods and services, remains the same as it ever was. And the same applies, so it seems, to the aims and incentives of capital. For, as in the past and doubtless also in the future as well, those who possess capital today seek to increase their wealth. In respect to the function of capital within the context of a business, however, decisive changes have occurred. The widespread but fallacious view that capital plays the leading role here is a hangover from the period when great fortunes were being amassed, a period when the realities of industrialization meant that particularly enterprising ventures led to the accumulation of vast amounts of capital. As most people at that time had no clear understanding of the multifarious functions of an entrepreneur, they characterized entrepreneurs quite simply in terms of their most conspicuous feature, namely their "wealth," and defined them as "suppliers of capital." This designation was indeed apt in respect to the original entrepreneur, the introduction of corporations resulted in a distinct separation of the functions of management on the one hand, and supply of capital on the other. The ensuing battles over the division of responsibilities gave rise to the rather imprecise distinction between "capital" and "labor."From the Hardcover edition.
Excerpted from An Age of New Possibilities by Reinhard Mohn. Copyright © 2004 by Reinhard Mohn. Excerpted by permission of Crown Business, a division of Random House LLC. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.