When Lee Kuan Yew, former Prime Minister of Singapore, visited India in 2006, he met Narayana Murthy, founder of Infosys and now its Chief Mentor. In a public meeting they discussed ‘governance’, a subject both were most interested in and which, they felt, was the key to improving India’s economic performance. Lee suggested that Murthy should take a more active role in the governance of India, to which the latter replied humbly that he was not equipped for the job. He said a business enterprise was primarily concerned with the efficient use of resources and production of economic surpluses, whereas a leader of a democratic institution has to be deeply concerned with social and political outcomes also. The more difficult problem of leadership in a democracy he alluded is managing ‘equity’ (not the shareholder variety), rather than ‘efficiency’.
An analysis of the differences and similarities in the challenges of leaders in government and business corporations provides useful insights into the role of leaders in government. A critical difference is the difficulty in defining what the value to be created is and for whom. In the corporate sector, ‘value’ can be simply, though too narrowly, defined as value for the shareholders of the enterprise. This can be measured in monetary terms. Whereas an agreement about what exactly the public values is not easy to obtain. Leaders in democratic governments must negotiate goals and missions with the public and cannot simply ‘get on with implementation’ as they are often exhorted to. They must consult widely to obtain consensus on goals, and define measures even for those that are intangible, before they implement. They need strong consensus for speedy implementation.
Another critical difference is in the source (and nature) of authority of leaders in government, especially democratic governments. Corporate leaders are appointed from above—by their boards: also many obtain power from their personal, large shareholdings. Whereas leaders in democratic governments must obtain their authority from the people they have to lead. Therefore they cannot impose their writ on people in the same way that a corporate leader may on employees in the corporation. In public management, the people also have power to hire and fire their leaders.
Leaders in government have more complex missions and they cannot as easily control those who must execute. Moreover implementation is much more difficult in India’s federal system than in smaller countries with unitary structures, such as Singapore. In India power is devolved to the states and should go down even further to local bodies. Yet the central government and ministries are expected to implement programs for improvement of health, education, water management, and infrastructure across the country, and ensure that benefits reach the grass-roots. This is not happening fast enough. Therefore there are calls for stronger leadership and better institutions.
Problems of coordination and control of large programs beset large multi-national corporations too as they expand across geographies and cultures. A survey of 2000 CEOs and executives of MNCs around the world revealed that the principal organizational challenge they faced was ‘coordination’. They wanted less ‘centralization’: so that appropriate solutions could be found locally. They also wanted less ‘de-centralization’: to avoid duplication of efforts and improve efficiency. ‘Think local, act global’, or the other way round, ‘Think global, act local’, were the mantras they were repeating. As management complexity increases, they too are seeking better concepts of organization and leadership.
A new organizational architecture
Let us turn therefore, to concepts and theories of organization. An analysis of prevalent ‘theories-in-use’ of how to organize a complex system reveals two dominant theories: ‘hierarchies’ and ‘markets’. In fact these are the two alternatives described by Oliver Williamson, winner of the Nobel Prize in economics in 2009. These are also the two alternatives that executives imagine. Hence their dilemma: they want less ‘centralization’, which requires a hierarchy that they fear could stifle innovation; but they also want less ‘decentralization’ which would open up an internal market for ideas and resources no doubt, but one they fear may they may not be able to coordinate and control.
However, markets and hierarchies are not the only forms of organizational architecture. There is a third, which operates in natural systems. Imagine a tropical forest, humming with a variety of life. It is not an unformed chaotic system: it has a rhythm to it. Ask yourself, ‘Who is in charge of this complex system?’ It is not obvious who is, yet it functions very well. A study of the organizational architecture of such ‘complex, self-adaptive systems’ in nature and elsewhere (such as the Internet) reveals the principles for designing organizations that can remain on the creative edge between a stifling hierarchy (and bureaucracy) on one side and unorganized confusion on the other. (These principles are explained in my book, Shaping the Future: Aspirational Leadership in India and Beyond, published by John Wiley and Sons.)
An essential feature of such organizations is the strength and quality of the ‘lateral linking organizations’ within them. Traditional organization designers concentrate most of their energy in specifying the organization’s vertical structures—hierarchies, allocations of authority, reports up and instructions down. Whereas lateral links across the organization are not designed with similar attention. They are left to be shaped by informal market forces and political alignments within the organization. Hence they are often weak or inappropriate.
In the vertical view of organization, the need for coordination is met by appointing an authority above those who must be coordinated to whom they must all report. Thus weaknesses in the lateral structures are addressed with more vertical structures—more authorities, more monitors, and more controls, which crowd the space for movement and creativity within the organization. In India, with the pressure on the government to produce results, schemes are multiplying and organizations too. Central coordinating agencies are appointed which turn out to be not sufficiently effective. Therefore monitoring agencies are appointed. Soon several such agencies for coordinating and monitoring must be coordinated!
Lateral linking structures are designed to facilitate and strengthen collaboration amongst the many agencies who must work together, rather than imposing one more ‘boss’ over them to force them to coordinate. These mutually supportive mechanisms are abundant in natural systems, such as the tropical forest. Such mechanisms also operate in many global, decentralized, yet well coordinated enterprises. Think of the Internet. Or the Visa credit card network. They hold together because the lateral links are strong, not because there is an authoritarian central command. Large, international consulting companies also rely on lateral linking mechanisms. They have fiercely individualist partners. Each is measured and rewarded for performance so internal competition can be high. However, they are brought together in lateral linking ‘practices’, in which they share ideas, learn from each other, form teams to pursue new ideas and serve clients.
Credit card networks and international consulting companies may share some characteristics with federal countries. However, their scales and complexities are lesser. Therefore skepticism about the transportability of principles from one to the other is expected. On the other hand, one could argue that nature, where these principles work, is even more complex! Fortunately support for these ideas now comes from other sources too. Elinor Ostrom, who won the Noble Prize for economics in 2009 with Williamson, has shown that large human communities, who do not leave it to the market alone, can coordinate their own actions without a hierarchy to govern them, and produce better outcomes for all.
A new model of leader
An examination of how such organizations work reveals the essential role of leaders within them. What is critical is the type of leaders they have. A widely prevalent model of leadership, reinforced by stories, myths, and stereo-types, is that a leader must be tough and strong. In this version, he (the popular image of a leader is generally a man) has authority granted to him over others so that he can lead them. Whereas lateral organizations require that leadership is exercised without the leader being designated the ‘boss’. In such organizations, leadership is earned by the ability to influence others to co-operate. The way women often make family members co-operate could be a more appropriate model! Indeed, one should apply insights into our organizations from the way the feminine force binds and sustains nature.
India is a diverse country, with a federal structure, and an ongoing process of devolution of power away from the center. At the same time, it needs much faster implementation of changes across the nation with much better coordination of action. It cannot impose a hierarchy. Nor can it leave it to the market. Therefore India, more than any other country in the world, must systematically master these new theories of organization and leadership.