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Let me start by saying that my journal this week will not be based on the readings. So, if you're looking to measure the 'quality' of my journal based on that expectation you are about to be disappointed. This week I want to focus on the broader lessons which I am beginning to learn from this course. Lessons which are somewhat foreboding in their implications for my (and our) future yet incredibly relevant and, I think in the end, empowering.

In previous Management classes, especially MGMT 211 Understanding Organisations and MGMT 223 Understanding Work and People, we were presented with a broad range of theories and asked to analyse and critically engage with them. Stage three is supposed to be the level where we're beginning to take the analysis that we started to do at stage two and begin to form our own conclusions. Analysis become synthesis. It's at this stage that we are to begin fine tuning our ideas so that we can, ostensibly, move on to post-graduate study where we will begin to synthesise our own ideas and contribute to the body of knowledge in our chosen discipline.

At first glance it's difficult to see how this class follows that pattern. The assumption is that this class is meant as a 'simulation' to prepare us for professional work. We're placed in situations that will be a reality for us when we begin working. Our performance will be judged by a set of KPIs. In this scenario our KPIs are tasks which must be completed by a certain time, peer evaluations at the end of the class and SHV. Failure in these areas mean marks will be deducted. It's no coincidence, though, that the brunt of the grade is based on our learning journal. More or less we are all involved in an experiment rather than a simulation and our final grade will not be based on the aforementioned KPIs as much as it will be based on what conclusions we've come to based on this experiment.

I can say that I'm beginning to gain some insights into the behavior of organizations and capitalist society from this big experiment. I remember an experiment that was done some years ago by British researchers. They wanted to see how long it took for passengers to evacuate an aircraft in an emergency and what cabin layouts best facilitated evacuation. The researchers needed to find a way to get the participants to act as if they were in a life or death situation in order to get accurate data. To do this they provided a cash reward if everyone could get out within a certain amount of time. The result was a stampede for the exits. The implication of this is that the potential for a monetary reward is just as motivating to people as the preservation of their life even with a risk of injury.

For our experiment the incentive is a 5% premium on our grade for the team that can attain the highest shareholder value. From the outset of students were taught to value SHV over anything else. There really aren't any other metrics given in the simulation to quantify how successful firms are. However, I can think of a metric which would be a far better indicator of how successful a firm is in providing value not just for shareholders, but for everyone who is affected by the firm, their performance, and their decisions. That metric is STAKEholder value. If performance of firms was measured by this metric than it would take into account not only the financial wealth that the firm creates for it's owners, but also the wealth that it creates for its workers, community, customers etc. 

The reality of the society we live in is that the performance of most firms are measured by SHV. Because of this singular metric firms and their boards have become largely alienated from the needs of their stakeholders. Thus we see greater polarization in our societies as populist ideas begin to take root all over the world. The Scottish almost voted for independence, fast food workers are demanding higher wages in the United States and here in NZ there's a push for cheaper housing, better transport and greener policies. 

In this simulation I've begun to see first hand how firms can become disillusioned from the needs of their stakeholders. The decisions that we have to make in this simulation are completely alienated from the affect those decisions have on our stakeholders. If we produce more there's no metric for how much pollution it causes. If we fire employees there's no risk of employee retaliation. This is the reality for CEO's and CFO's of many firms across the world. They make their decisions in their board rooms based on numbers given to them by a data analyst and are conveniently able to ignore the human affect of their decisions.

1 Comment

  1. Hi Jeremy, I really liked the way that you tell a story with this journal. You are correct, or at least I should say that I agree with you, regarding your comments around shareholder value. It has become the de-facto measure of an organisations success, but it is by no means the only one. Your journal this week shows a nice progression to build an argument around stakeholder value that should be one of the influences for directors. However your argument would have been stronger if you had demonstrated how stakeholder value could be measured and how it could be linked to SHV and bottom line results.