Pope John Paul II: a great management thinker, parts I and II

Pope John Paul II: A great management thinker – 1 (April 5, 2005)

Ben Teehankee

Managing For Society column, The Manila Times

Pope John Paul II has passed away. This is a time for grieving for Catholics like me and people of goodwill all over the world. I’ll also miss him because he may have been the most insightful business management thinker who ever lived. A column devoted to managing for society must pay homage to a spiritual leader and thinker who believed that business and society must always be in creative harmony.

People don’t usually think of the Pope as a business management thinker. Discussions of business management gurus bring to mind the likes of Peter Drucker, Michael Porter, Tom Peters or, more recently, Jack Welch. Yet, the Pope had a knack for expressing many progressive business management ideas without any jargon at all, often anticipating best-selling management writers by several years.

It would be impossible to give justice to the Pope’s thinking on business management in a column but I’ll try to do it in two installments. I’ll focus on his key ideas about economic initiative, the role of profit, the purpose of the firm, worker dignity, human capital, consumerism and sustainability. Mainly, these ideas can be found in the Pope’s encyclicals entitled Sollicitudo Rei Socialis (1987) and Centesimus Annus (1991). I encourage every business manager to read these two important documents which are freely available over the Internet.

Entrepreneurship is vital to society.

Michael Novak, in The Catholic Ethic and the Spirit of Capitalism, hailed John Paul II as “the pope of economic enterprise” because he made personal economic initiative a key idea in his social teaching. The Pope wrote in almost glowing terms about the potential of capitalism, properly understood, for promoting the common good. Moreover, he always pushed for the idea that personal economic initiative is a fundamental human right.

Economists like Joseph Schumpeter and Friedrich Hayek have always stressed the vital role of the entrepreneur in society. So did the Pope. In Centesimus Annus he explained that “it is precisely the ability to foresee both the needs of others and the combinations of productive factors most adapted to satisfying those needs that constitutes another important source of wealth in modern society.” In other words, the entrepreneur who acts quickly to meet a real need of those around him is giving an important social service.

This may come as a surprise to many who tend to think that Catholic Social Teaching encourages laziness and excessive dependency – both examples of weakness in character. The opposite is true. The Pope argued that the social role of “initiative and entrepreneurial ability” is decisive. He linked entrepreneurship to the development of basic virtues important for everyday economic life “such as diligence, industriousness, prudence in undertaking reasonable risks, reliability and fidelity in interpersonal relationships, as well as courage in carrying out decisions which are difficult and painful but necessary, both for the overall working of a business and in meeting possible setbacks.”

Profit is a good thing, but not the only thing.

The Pope favored profit. He saw it as a useful indicator for measuring the results of human innovation. In Centesimus Annus, he wrote: “The church acknowledges the legitimate role of profit as an indication that a business is functioning well. When a firm makes a profit, this means that productivity factors have been properly employed and corresponding human needs have been duly satisfied.” Thus, he supported the principle of creating economic value by competitively meeting demand.

He was careful, though, to remind business managers not to be single-minded about profit because a business has a bigger purpose. “In fact”, he explained, “the purpose of a business firm is not simply to make a profit, but is to be found in its very existence as a community of persons who in various ways are endeavoring to satisfy their basic needs and who form a particular group at the service of the whole society.”

In Built to Last, Jim Collins and Jerry Porras found out that many of the great companies which stood the test of time, like Sony and Johnson & Johnson, worked hard for both profit AND social contribution. It was never a forced choice. They achieved both.

This is corporate social responsibility without the jargon and the media fanfare that often comes with CSR nowadays. Like the Pope, management thinkers like Charles Handy and Michael Porter emphasize the social responsibility role of business. Not everyone thinks this way. Peter Drucker, the original management guru, is emphatic: “If you find an executive who wants to take on social responsibilities, fire him. Fast.” Sadly, Drucker is required reading in many business schools, while the Pope is not.

In the final instalment of this column, I will talk about how the Pope’s ideas anticipated the human capital craze, why Jack Welch should not be a management role model and how the Pope has the cure for, in the words of Joel Bakan, the psychopathic state many business corporations are in.

Pope John Paul II: A great management thinker – Part II (April 12, 2005)

Ben Teehankee

Managing For Society column, The Manila Times

In the first instalment of this column, I discussed some of the Pope’s key ideas about personal economic initiative and the role of profit in the management of a business. The Pope also had a lot to say about the purpose of work for people, human creativity and the need for business to contribute to the common good.

Dignify people through work

The role of work for people is central to the Pope’s writings. He rejects the commonly held notion that workers are simply factors of production to be minimized for the benefit of the bottom line. In Laborem Exercens, he explained that early capitalism committed a grave error by treating man at the same level as production materials and not according to the dignity he deserves as “the true purpose of the whole process of production.”

This contrasts sharply with ideas popularized by Jack Welch, former CEO of GE. Credited for increasing the stock price of GE by several thousand percent and named by Fortune magazine as Manager of the Century, Welch has become a de facto management guru. A search of the National Bookstore website yields no less than 9 books on Welch and his leadership style, including Jack Welch and the G.E. Way: Management Insights and Leadership Secrets of the Legendary CEO. One of Welch’s rules of thumb is to regularly rank people by performance every year and to weed out the bottom 10 percent. A layoff used to be considered a final and regrettable option. Encouraged by Welch’s ideas, it has become a method of choice for many managers chasing profit for shareholders at any cost.

Welch would get serious disagreement not only from the Pope. Management thinkers such as Douglas McGregor, Henry Mintzberg and W. Edwards Deming have also stressed worker dignity and the duty of management to maintain worker pride in support of excellence. Deming, in particular, has argued against performance ranking as a demeaning practice that has no place in a quality-oriented workplace.

Human capital is key

Everyone talks about human capital nowadays. People are more important to high-performance workplaces than ever before. For the Pope, this naturally follows from man’s priority role in work itself. He explained that “whereas at one time the decisive factor of production was the land and later capital … today the decisive factor is increasingly man himself, that is, his knowledge….”

The information age has shown that the value of companies is no longer well predicted by its balance sheet but more by the competence of its people and their capacity to continuously learn. Howard Schultz, former CEO of Starbucks, liked to describe the 9,000-plus store as not a coffee business, serving people; but as a people business, serving coffee.

From self interest to the common good

Joel Bakan, a law professor at the University of British Columbia and writer of the award-winning documentary The Corporation, describes the business corporation as an artificial person with a psychopathic personality. Like human psychopaths, and unlike the people in them, corporations are purely selfish and feel no empathy for others. Also, argues Bakan, corporations often refuse to accept responsibility for their own actions, and instead resort to the manipulation of public opinion.

Bakan explains that the psychopathic nature of the business corporation arises out of its “limited liability” feature which allows shareholders to escape from any personal liability beyond the cost of their investment while still holding the possibility of unlimited profit. This practically forces corporations to pursue profit at all cost, and often at great expense to others.

Can a business corporation be more sensitive to others and more accountable for its actions? The Pope seems to think so, especially if corporate managers bear in mind their responsibility for the common good. Impressive financial results cannot hide nor justify harm to others. The Pope wrote: “It is possible for the financial accounts to be in order and yet for the people, who make up the firm's most valuable asset, to be humiliated and their dignity offended.” The widespread use of labor contracting in the country needs to be studied carefully from this perspective.

In conclusion, the Pope’s thinking on business management is profoundly relevant given social and economic realities today. The manager is much more than an organizer of factors of production aimed at producing profit. He or she is a moral agent whose values and decisions, in partnership with workers, harness human creativity for the dignity of people and to serve society. Applying the Pope’s principles can lead to a gentler and kinder capitalism.