|
From the pages of:
World
Energy, vol. 5 no. 2
The Evolution of Organizational Relationships:
Multicultural Ethics and the New World Order
by A. Earl Swift
Chairman, Swift Energy Company
A fool sees not the same tree that a wise man sees. –
William Blake
As we witnessed the horror of the terrorist attacks on September 11, most of
us realized almost immediately that we were watching our familiar world undergo
radical change. We recognized the tragedy as a watershed event, marking a
violent break between the past and the future. What we did not fully comprehend
was the impact that the attacks would have on the emerging new world order, or
the vital role that business leaders would play in shaping our global future.
The terrorists struck many of the most established organizations of modern
life, both symbolically and in reality. The attacks shut down air
transportation, caused the world's largest stock exchange to close, forced a
partial evacuation of America's military headquarters and destroyed the
best-known symbol of international commerce, the World Trade Center.
Following these external attacks and the ensuing economic downturn they
helped accelerate, internal flaws were revealed in some of our most respected institutions. Widespread abuses of accounting practices were reported in one
industry after another. A number of powerful executives were found to have
mismanaged investor capital for private benefit. And analysts were discovered to
have provided misleading advice to investors. Moreover, the moral ills uncovered
extended far beyond corporate America into charities, government agencies and
even churches.
The external threats and internal corruption facing modern organizations are
symptoms of a deeper crisis in values that touches every corner of the earth.
Although exposed by September 11 and its aftermath, this crisis has been
building over a long period of time and is a natural outgrowth of the evolution
of organizational relationships. That evolution has led us to a truly global
economic system. However, it has failed to provide us with a set of common core
values — that is, a multicultural ethic — that will make the system function
successfully.
How did we come to this crisis in values? And how can business leaders guide
us through the challenges ahead? Answering these questions requires an
examination of how basic human nature has directed organizational development
and change throughout human history.
Universal Truths
Science suggests that the entire universe once existed as undifferentiated
energy within a volume of space smaller than a single atom. Over the course of
billions of years, that tiny speck expanded into innumerable galaxies, each
containing countless stars and planets. Vast complexity developed from
microscopic unity through a process governed by unchanging physical laws that
are still not fully understood.
The story of human organizations is similar to the story of the universe.
Tens of thousands of years ago, the entire human enterprise existed as
undifferentiated activity within very small organizational units called
families. Over time, the family evolved into today's complex network of kinship
systems, businesses, institutions and communities. The expansion of human
activity, like the expansion of the universe, led to the creation of enormous
complexity and diversity. Just as physical laws govern the universe's continuing
development, fundamental principles of human nature govern the expansion of
human culture, although these principles also are not fully understood.
The importance of understanding how human nature directs the process of
organizational development cannot be overstated. Modern corporations are in
constant flux, changing as they move from task to task. Today's business
organizations often rely on complex technologies that were topics of science
fiction only a few decades ago, and they operate in a rapidly fluctuating
environment, where whole industries ebb and flow in response to short-term
volatility in worldwide markets. In this sea of change, a constant anchor is
human nature. No matter how complex or technologically sophisticated modern
organizations become, all of their interactions ultimately boil down to people
acting and reacting in relationship to other people. And as more sophisticated
technologies for remote communications are introduced, it becomes increasingly
important to understand how human nature governs interpersonal interactions and
organizational behavior.
This knowledge of human nature is essential to understanding all types of
human organizations, from the high-tech global conglomerate of tomorrow to the
primitive hunter-gatherer clans of many millennia ago. Only by focusing on
fundamental human nature can we truly understand the evolution of organizational
relationships, and only by understanding how organizations evolve over time can
we successfully manage the dynamic complexity of doing business in the years
ahead. Effective leaders must understand that all human relationships, even the
diverse interactions of today's high-tech global economy, are ultimately rooted
in principles of human nature as old as mankind itself.
Human Needs
Human beings by nature have certain fundamental needs, which range from the
concrete physical requirements for food, clothing and shelter, to more esoteric
yearnings for companionship, meaningful purpose and a religious sense of
ultimate destiny. Organizations exist to meet these needs. At its core, an
organization is simply an effort by one or more individuals to control the
activities of themselves and others in order to accomplish some objective.
Control is accomplished through the organization's decision-making processes.
All organizations therefore consist of individuals clustered around a shared
purpose and shared ways of making decisions (see Figure 1).
Figure 1: The evolution of organizational relationships
I. Organizations consist of individuals clustered around a
shared purpose with shared ways of making decisions. Core values held in
common by the members of an organization determine the nature and scope of
organizational authority, which in turn determines the organization's
decisionmaking processes.
II. The family is the oldest form of organization and the social system
most closely aligned with human nature. It remains a primary vehicle for
imprinting core values on the individual.
III. The expansion of human culture has caused a variety of
limited-purpose organizations to evolve from the original all-inclusive family
system. In order to promote group cohesiveness, specialized organizations
exclude any value that is not essential to the limited mission.
IV. Some of the oldest limited-purpose organizations — such as
governments, religions and the military — have their origins in early
agricultural civilizations.
V. With the industrial revolution, business enterprises took
responsibility for many economic activities that had previously been satisfied
within the family unit.
VI. Today's global economy consists of a complex network of highly
specialized organizations comprised of diverse individuals from a variety of
religious and cultural backgrounds. Few common values remain upon which
businesses can base organizational authority.
VII. The world is now facing a values crisis. Multicultural ethics must
evolve if the global economic system is to continue to function.
VIII. Because economic activities are driving globalization, business
leaders have a key role to play in creating the common multicultural ethics
that are needed for the next stage of organizational evolution.
As I discussed in a previous paper (World Energy, Vol. 5, No. 1), all human
organizations utilize three universal decision-making processes:1) individual
decision making based on self-interest, 2) group decision making based on
consensus and 3) authoritative decision making based on values, rules and
hierarchies (see Figure 2). The three types of decision making correspond to
the basic needs for liberty (to be free), community (to belong) and purpose
(to achieve). Successful organizations, ranging from small businesses to whole
societies, must achieve a balance of all three processes. Organizations that
fail to create this balance move toward one of three potentially dangerous
extremes and, over the long term, become both unstable and ineffective.
Figure 2: Balanced decision-making processes
The Family Foundation
The family is the oldest form of human organization and the social system
most closely aligned with human nature. It has been called a natural form of
society because it provides the most fundamental social needs. The purpose of a
family goes far beyond procreation to the nurturing of core values that comprise
the foundation of all human relationships. Although the structure of family
relationships varies widely from culture to culture, the existence of the family
is universal throughout all of human history.
For most of that history, the family was also the primary unit of economic
production, causing typical families to encompass a far broader range of
activity than they do today. And because business activities were not
compartmentalized from other activities, the ethical values that governed the
rest of family life also applied to economic production. Economics became
pervasively intertwined with everything else.
The pervasiveness of economics still exists today — a fact brought home to
me on the first day of a class I attended at Pepperdine University. The
professor stated that, with the exception of a little psychology, economics is a
universal subject that encompasses every other discipline. Coming from an oil
and gas engineering background, I initially thought the professor's ideas were
far fetched. Today, I see the wisdom in his point of view. All transactions
between individuals touch on economics, not just those transactions we typically
consider pecuniary. Therefore, business activities cannot be completely
separated from the core values that govern the rest of culture.
In the past, a broad application of the term "economics" in a
family context would not have seemed as strange as it does now. The word
"economics" comes from two ancient Greek words, oikos, meaning
"house," and nemein, meaning "to manage." Economics
originally meant to manage a home, partly because it was within the family
system that wealth and sustenance were produced and consumed. Even today, when
most production activities have been taken over by business organizations, the
family remains a primary unit of economic consumption. Of course, the purpose of
these early family units involved much more than the production and consumption
of wealth and income. In a very real sense, early families were a microcosm for
all of human culture — all politics, all business and all society. As a
result, the value systems of early families governed all significant decisions.
Today's family units play a far more limited role. Nevertheless, core values
taught in modern families still form the basis of authority for virtually every
kind of organization. Leaders in business organizations must therefore take
family influences into account. Core values imprinted during childhood will
constrain the range of common objectives and shared decision processes that
business organizations can effectively maintain. Perhaps more importantly, the
processes used by families to teach core values are very similar to the
processes that business leaders must use to guide the evolution of an
organization's mission and culture.
Beyond the Family
As the scale of human activity continued to expand, individual tasks became
more diverse and specialized, making it difficult for the family unit to
maintain agreement concerning all-inclusive purposes or shared decision-making
processes. Irreconcilable goals and processes had to be excluded from the
family's activities in order to maintain its cohesiveness. Individuals then
looked to the formation of larger, limited-purpose organizations to meet
specific needs excluded from the family's shared objectives.
Some of the oldest limited-purpose organizations have their origins in early
agricultural civilizations. With the agricultural revolution, human culture made
a major leap in complexity. No longer were all activities contained within
family-based clans and tribes. Limited-purpose political systems based upon city
states, and later nation states, began to evolve. One clan or tribe typically
took over governing functions for all clans and tribes, leading to the creation
of royal families.
These new political organizations were born of necessity. With agriculture,
relationships to land became more important. Property rights had to be
protected. Irrigation projects had to be implemented. Planting seasons had to be
determined. Trade had to be organized. All of these projects were beyond the
scope of individual families.
The authority systems for these early limited-purpose political organizations
were often based upon religious values. Deeply held belief systems, more than
military might, reinforced the power of political leaders. Ultimately, leaders
retained their power because they were able to meet certain human needs,
including some spiritual needs, better than the family could by itself.
Much later, with the industrial revolution, economic activities also began to
be removed from the family unit and placed in limited-purpose business
organizations. Unlike family farms and small mom-and-pop trading stores,
industrial production required large accumulations of capital and labor in order
to achieve economies of scale. The size of industrial organizations quickly grew
beyond the scale that individual families could manage.
These large-scale activities also began to require specialized training, so
educational organizations were formed to take over learning processes that had
previously been family based. Once these educational processes were removed from
the family, problems began to emerge that have yet to be totally resolved. Not
only has education faced difficulty in accomplishing its basic mission of
teaching primary skills, but in the last century, we also saw a succession of
would-be leaders try to usurp the education of the young to legitimate their own
tyrannical authority. Even today, terrorist organizations seek to imprint
intolerable values on impressionable minds.
Obviously, the processes that led to the creation of limited-purpose
organizations have been somewhat unpredictable, taking place in different ways
and at different rates within various places and cultures. For example, while
many functions were being moved outside families in heavily populated regions in
the United States, economic production was still an important part of my own
family unit in depression-era Oklahoma. My brothers and I learned the oil
business from our father, who was in business with his brothers. As we were
growing up, however, the era of the small, family-based drilling company was
coming to an end, and our father encouraged us to seek an education and find
jobs with large, integrated oil companies, which we did. Today, the oil business
is a global, capital-intensive enterprise. Little room currently exists for a
successful family-based organization, although the vestiges of family roots
still remain in many companies, including the one I started with the help of my
brother, my son and others.
The Maturing Business Enterprise
The evolution of organizations throughout history can provide important
insights for an entrepreneur seeking to start a new business. Initially, most of
the activities of an entrepreneurial organization exist in a microcosm, but as
the organization grows, some functions begin to coalesce into sub-organizations
whose purposes are only a component of the company's overall mission. At the
same time, the business enterprise gradually matures from individualism to
balanced decision making.
When I launched Swift Energy Company, I found that I was encountering a
maturation process analogous to those I had experienced as a father. Very young
children are governed almost exclusively by self interest. Their values are ill
formed, and their decision making is often suspect. As children mature into
teenagers, they begin to develop an identity separate from their parents. The
peer group begins to take on an important role, and decision making becomes a
balance of individual self interest with group consensus. Mature adults
eventually develop an internalized value system that provides authority for
making most of the important decisions in life. That value system is combined
with individual and group decision-making processes to form a mature, balanced
individual.
Business organizations follow a similar path to maturity. The young
entrepreneurial organization is often dominated by individualism and innovation.
The common purpose of the organization is often poorly understood by the
organization's membership, and decision-making procedures are usually out of
balance. As the organization grows and activities become more diverse and
complex, group processes are created to provide a check on the excesses of
individual initiative. The organization's initial success simultaneously creates
a heightened sense of teamwork and group membership. Over time, a mature
organization develops a shared sense of mission and a shared corporate culture
that together form the authority system for flexible and balanced decision
making.
The leadership of the business organization, particularly the CEO, plays a
critical role in this maturation process. Leadership must continually focus on
two key characteristics of successful organizations: 1) a well-defined and
well-understood mission and 2) balanced decision-making processes. Because much
of an organization's development is an outgrowth of human nature, rather than a
product of specific design, the CEO's primary control revolves around these two
key characteristics. CEOs have far more influence over organizational mission
and strategy than they have over day-to-day activities, and they can exert
greater control over decision-making processes than they can over specific
decisions.
Global Networks
As organizations become increasingly specialized, they are more dependent on
networks of other organizations. Some of these networks have no one in direct
control, but they remain essential both for the success of individual
organizations and for the proper functioning of society as a whole.
We now live in the age of the network, an era of quasi-organizations run by
an invisible hand. Even here, however, the principles of human nature reign
supreme. The invisible hand exists because human nature will ultimately direct
human activity toward the satisfaction of human needs given balanced
decision-making processes. Networked relationships — whether they are
described as supply chains, markets, social movements or global culture — therefore have several things in common with more basic, natural organizations
because, like them, networks are subject to the laws of human nature.
Like natural organizations, a network always has a purpose. The purpose of a
computer network is to share and process information. The purpose of a market is
to facilitate the exchange of goods and services. The purpose of a financial
system is to allocate funds to achieve good returns on investment.
Similarly, networks have to balance the three decision-making processes.
Unlike natural organizations, however, the authority system of a network does
not involve human hierarchies. Instead, authority is invested in common values
and rules that are often expressed through some generally accepted measure of
performance. Computer networks have standards, markets have money and financial
systems have interest rates.
As in natural organizations, the decision-making processes of a network can
get out of balance. For example, why do stock markets have cycles of bubbles and
corrections? At least part of the reason is that the decision-making system gets
skewed toward individualism, particularly when the market is confronted with
something new.
A good example was the dot-com debacle. When the Internet burst on the scene,
it represented a new kind of technology. In an environment of new businesses and
new technology, individual entrepreneurship reigns supreme, in the same way that
individualism dominates the development of young children and young
organizations. During the dot-com bubble, excessive individualism led to
short-term decisions that were inconsistent with the long-run interests of
society as a whole. Investors ignored fundamentals and instead bet on herd
instincts such as greed and fear. Consensus processes among institutions and
other market leaders that could have provided more accurate risk assessments
were instead dominated by individual motives. Similarly, the authority system,
which is designed to provide openness, became overly lax, leading to individual
abuse. In a more mature, balanced system, the collaborative and authoritative
aspects of the market would have educated individual participants more quickly
about the divergence of short-term valuations from long-term fundamentals,
leading to less volatile market swings.
Although subject to cyclical extremes, the highly flexible authority systems
of these network relationships have allowed a whole new level of complexity,
creating a truly global economic system for the first time in human history. At
the same time, the emerging global system is still very young. It began in the
early 1900s with a wave of industrial innovations such as the telephone, radio
and air travel, and it spread through a century of political conflict. During
the last couple of decades, its growth accelerated significantly with the spread
of television, satellites, computers and the Internet. Only recently have its
full ramifications become apparent.
Like all young systems, the emerging global order is dominated by
individualism, creating significant volatility and instability. Simultaneously,
the information age has placed tremendous technological power in the hands of
individuals. As the September 11 terrorist attacks clearly demonstrated, global
culture is about to enter a very risky adolescence. It will need to mature
quickly.
Toward a Multicultural Ethic
In order for the global system to develop the authority structures needed for
mature and balanced decision-making processes, a set of common core values
shared universally by all cultures and all religions must be developed.
Internalizing these common values throughout the world will not be easy. As
change accelerates and limited-purpose organizations become increasingly
specialized, fashioning the common cross-cultural ethics needed for cohesive
organizational relationships becomes a much more difficult task.
It is time for our business executives to stand up and provide a full measure
of moral leadership. If the world is to develop a set of commonly held values,
it is business that will have to point the way. This is only logical, since
business has played a major role in creating most of what is right and wrong in
modern life. In bringing the world together into a single economic system, it
has brought great prosperity to some parts of the world while leaving other
parts in unbelievable poverty.
Families and religious institutions will continue to play a crucial role in
forming personal values, but cultural diversity will prevent them from providing
a unified ethical system for global business activity. And the human desire for
freedom will continue to demand religious and cultural diversity.
Acceptance of diversity does not necessarily require moral relativism,
however. The limited number of ethical absolutes required for effective business
organizations can be drawn from an understanding of basic human nature, without
resorting to any particular religious or cultural point of view. The evolving
global value system will protect diversity, but it will also insist on universal
standards of behavior such as "do not kill," "do not steal"
and "do not lie." The universal human requirements of freedom,
community and purpose can provide the foundation of most business ethics.
Business leaders have a responsibility to build these common values into
their organizations. Today's leaders must also insist that these core values
permeate the multitude of other organizations within the matrix of their
business circle. They cannot be shy about promoting a moral point of view, and
they have to accept the fact that all effective business missions have a
spiritual component. Business has never been about making money. It is about
meeting human needs. Making money is a necessary component of survival, but it
can never provide the real reason for existence. We all have to breathe to live,
but we don't live just to breathe.
Our business organizations must work with governments and other institutions
to create a global value system based on multicultural ethics that will guide
the operation of the complicated organizational universe that continues to
unfold. Our common values must be founded on basic principles of human nature.
They must foster balanced decision-making processes and focus on meeting basic
human needs. The challenge is daunting. We must piece together a universal
mosaic of core values from the shards of diverse special interests. While this
might not seem to be a task in which business should become involved, it is, in
fact, a task that only business can lead.
Editor's Note:
In the upcoming third article in this series, the author discusses
multicultural ethics and the strategies business leaders can use to internalize
core values within diverse organizations.
A. Earl Swift is chairman of the Board of Directors of Swift Energy
Company, a position he has held since he founded the company in October
1979. He also served as the company's chief executive officer until
May 2001 and as its president until November 1997, having been succeeded
in both offices by Terry E. Swift.
Before founding Swift Energy, Mr. Swift was employed for 17 years by
affiliates of American Natural Resources Company, serving his last three years
as vice president of exploration and production for the Michigan-Wisconsin
Pipeline Company (MWPL) and American Natural Gas Production Company (ANGP).
Prior to that he was employed for seven years by Humble Oil Company, a
predecessor of Exxon U.S.A.
A specialist in reservoir engineering, Mr. Swift graduated from the
University of Oklahoma in 1955 with a bachelor of science degree in petroleum
engineering. In 1968 he received a juris doctor degree from South Texas
College of Law, and in 1988 he obtained a master's degree in business
administration under the President/Key Executive Program at Pepperdine
University. He is a registered professional engineer in Texas and a member
of the Society of Petroleum Engineers and the Texas Society of Professional
Engineers. He is also a member of the American Bar Association, the Texas
Bar Association and the U.S. Supreme Court Bar.
Mr. Swift is a member of Pepperdine University Associates and received
the Distinguished Alumnus Award from the Pepperdine School of Business and
Management. In 1997, he was voted Businessman of the Year by the North
Harris County Chamber of Commerce, and for each of the years 1994, 1995 and
1996, he was a finalist for Inc. magazine's Entrepreneur of the Year.
Mr. Swift serves on the Energy Committee of the U.S.-Russia Business
Council, on the Board of Directors of the International Petroleum Association of
America's Education Foundation and on the advisory board of the North American
Prospect Exposition. He is also chairman of the Board of Directors of
Interfaith CarePartners in Houston.
Together with his brother Virgil Swift, vice chairman of the Board of
Directors of Swift Energy, Earl Swift represents the third generation of the
Swift family in the oil and gas industry. His son Terry Swift, also a
director of Swift Energy, represents the fourth generation.
|
