Leadership Integrity in a Knowledge World

Leadership Integrity in a Fractured Knowledge World

Sandra Waddock

Boston College

Carroll School of Management

Chestnut Hill, MA 02467

617-552-0477

f: 617-552-0433

Historically, no individual, tribe, or even nation could alter the global climate, destroy thousands of species, or shift the chemical balance of the atmosphere. Yet this is exactly what is happening today, as our individual actions are mediated and magnified through the growing network of global institutions. That network determines what technologies are developed and how they are applied. It shapes political agendas as national governments respond to the priorities of global business, international trade, and economic development. It is reshaping social realities as it divides the world between those who benefit from the new global economy and those who do not. And it is propagating a global culture of instant communication, individualism, and material acquisition that threatens traditional family, religious, and social structures. In short, the emergence of global institutions represents a dramatic shift in the conditions for life on this planet.

Senge, Scharmer, Jaworski, and Flowers (2004).

Thank you for the invitation to speak here today in Sāo Leopoldo. I am honored to be here in Brazil to speak to you about the important topic of our role as business school educators in developing leaders of integrity for the knowledge economy we face.

Today I’m going to try to be a bit provocative about what leadership integrity means in the context of what I will call a fractured knowledge world—with particular reference to the implications for Jesuit business school education. The world presents many opportunities to tomorrow’s business leaders—but also many problems that need to be seen in new ways. I will argue that shift of mind—a metanoia—is needed that moves management thinking away from the flawed or at least too narrowly construed models currently taught in most business schools almost as gospel—and toward more holistic, integrated ways of viewing the world—so that we and those who will lead the world will actually create a world worth living in.

Fostering leadership integrity in the fractured knowledge economy that currently exists requires, in my view, a significant shift of mind—and a recognition of the links between the apparent plenty available to those in the knowledge economy and the destitution of much of the rest of the world. Integrity in this world means individual integrity, of course, with its ethical and values-laden basis, but it also means understanding the world as an integrated system—ecologically, socially, and from a business ecosystem perspective.

The current dominance of the neoclassical economics model pervades our thinking about management, competition, and the way businesses ought to be run—and there is something seriously wrong with that model, particularly if we recognize that what New Zealanders first termed the knowledge economy is supplanting the traditional, physical and financial asset-based economy. Many observers today believe that the current system is seriously broken—and that a transformation is needed so that we can begin moving our uses of economic and other material resources, our communities and societies, and the natural environment toward a healthier and mores sustainable world.

We who teach in or manage Jesuit business schools have an opportunity to take the lead, to transform thinking about what it means to teach management, to prepare leaders for a future where businesses recognize their central roles in the societies where they operate, as integral and important parts of those societies, but not as the only important institution. To do these we need to step outside the current system and gain new perspectives, even develop wholly new ways of approaching what it is that future leaders and managers are expected to do and know. We and they need to seek balance in new ways, particularly as we look at the problems that now exist in the world and try to tap the energy of the smart, creative individuals who attend our management programs around the world. This opportunity exists because of the inherent mission of social justice—or the development of human leaders who serve societies’ interests—that Jesuit business schools have.

But most business schools have yet to grasp the profound implications of the extent to which change in our approaches to managing and leading businesses are needed. Or to recognize that businesses need to serve not simply economic interests, but to actually return to their roots and serve societies’ interests. We need to recognize in our teaching and service missions, that is, that businesses are part of society, creatures of society, and subject to the interests of society.

Part of the problem, in my view, comes from the dominance of the neoclassical economic model, which articulates a clear, consistent, and straightforward core purpose for businesses—to maximize shareholder wealth. While this purpose is not globally accepted, it is clearly dominant in the United States—and, unfortunately in my view, increasingly pervasive around the world. Many nations have rightly understood that there are attendant issues of ecological and social sustainability, and that businesses rightly serve those interests. But those interests are more difficult to define, less readily measured on the traditional bottom line of financial reports, and require a different type, and arguably level, of thinking.

In arguing for change, I suggest that too many of our leaders and managers are operating today at moral and cognitive levels of development better suited to the world of the 1960s and 1970s than the emerging world of the 21st century, which is integrally knowledge-based despite the fractures I will also speak of. Too many are operating from a narrow worldview that suggests linearly that competition in a dog-eat-dog fight over resources is the best way to build businesses and societies. Too few know that the emergence of the knowledge economy is dramatically changing the rules of the game or that businesses can, should, and need to play essential roles in the evolution of healthier, more sustainable, and more humane societies. Too many focus on self-or company-interest without thinking of the bigger picture. I will suggest that an important part of our role as educators of future leaders and managers of businesses and other enterprises is to help them (and ourselves) develop to post-conventional levels of reasoning cognitively and morally so that they can cope with the complexities of the paradoxical fractured world created by globalization and the knowledge economy.

In this talk I will attempt to do three things:

Define the knowledge economy and some of its implications for management practice and leaders.

Illustrate the paradoxical nature of problems facing the planet in light of the disparities created between the advanced knowledge economies of the world and the mass of peoples and numerous societies that have yet to enter the knowledge economy at all, or have only entered it minimally.

Highlight some of the implications of the combination of knowledge economy and world problems for the integrity or managers and management education, and suggest some ideas, perhaps some provocative ideas, for forging a way forward through management education.

Knowledge in the Economy

What is the knowledge economy? According to the “Wikipedia,” an on-line free-knowledge encyclopedia with contributions generated from around the world, the knowledge economy refers to the use of knowledge to produce economic benefits.[1]

Knowledge, in turn, refers to the awareness and understanding of facts, truths, or information gained through experience or learning, or introspection, and which allows for the appreciation of interconnected details. Knowledge, that is, integrates facts and bits of information into a meaningful synthesis that is in some way useful or insightful.[2]

Knowledge can be defined as information or ideas put together in useful, meaningful, or interesting ways. When applied to the economy, what we typically mean is that knowledge becomes a foundational resource—or factor of production, as important as or perhaps more important than traditional factors of production of land, labor, capital, and equipment.

But knowledge as a resource or asset has different characteristics than physical resources or assets and creates a new context for the economy—and integrity (ethics) in that economy—than what we are familiar with. For example, a knowledge economy is characterized by:

Abundance not scarcity. Unlike physical assets, knowledge assets expand when they are shared. In some respects, knowledge acts like a public good once it is out there—it can be shared at no or very little cost.

Sharing…Knowledge works best when shared not hoarded. Once knowledge is out in the world, it becomes usable by anyone—in that sense it is far more difficult to control than physical assets or equipment, or even labor (read as unskilled labor).

Intellectual/human capital is the most valuable asset—not physical, financial, or even technological resources, yet because it is intangible, mobile, and not fungible, possibly the most difficult to be generate and sustain. That means that

Education is crucial to business and, arguably, societal success.

The Knowledge Economy

Because of these characteristics of knowledge, the knowledge economy differs considerably from the traditional economy. Let’s start by thinking about what a knowledge economy—or information society—predicted by Alvin Toffler years ago, might be today. We can say several things about this economy: There are a number of interconnected factors that create the new context for the knowledge economy. The knowledge economy is:

Knowledge intensive.[3] Skilled jobs in the knowledge economy—which covers much of the industrialized world—today are not manufacturing jobs, but rather are in knowledge industries and professions, where high levels of education are needed to cope effectively. Knowledge, education, and information and the people (or, in the jargon, human resources) who bring those to any enterprise become the sources of competitive advantage, rather than other types of skills—and essential components of successful societies, as well as businesses. Some 60% of US workers are now claimed to be knowledge workers. While the numbers are lower in other parts of the world, it is clear that traditional “factors of production” of land, labor, capital, and equipment are no longer the only critical factors—knowledge and the technology that supports are equally, if not more, central in a knowledge economy. Increasingly knowledge jobs, not just jobs based on physical assets, are being outsourced around the world, because that world is…

Technological and electronically connected. A main driver of knowledge intensity (and globalization) is the development of electronic technologies that permit instantaneous and global communications. Much of the world’s knowledge and many of its people are but a mouse click away. The so-called global village becomes a reality in this world of bits and bytes, graphical interfaces, and instant communication. Products and services are enhanced by technological advances and embedded computers that gather data on just about everything. This connectivity means that the capacity to integrate ideas, resources, information, see multiple perspectives simultaneously—and make sense of them—that is, to develop knowledge and associated insights—is rapidly becoming a critical success factor in a world that is…

Globalalized. Technological connectivity and the growing global scope of many corporations has resulted in a massive move toward globalization and the emergence of a global commons—the sustainability of the planet for future generations of human beings--unlike any we have seen before. At some level markets are integrating and homogenizing globally and have been doing so for the past 30 years. The same stores and products can be seen in many places around the world. The world’s biggest companies today are transnational in scope. Many if not most products are made in supply chain structures that span the planet. The moves toward “free trade” by the Brettan Woods organizations have created incentives for countries to lower their trade barriers and reduce regulations. At the same time we are increasingly aware of our ecological vulnerability because of the recognition of shared and scarce natural resources and a deteriorating natural environment. All of this globalization means that the fractured knowledge world is…

Boundary-less. Rapid globalization has resulted in the erosion of boundaries between countries, companies, communities, and individuals. We can instantaneously know what is going on around the world via the worldwide web, television, radio, fax, email, and other technological means, highlighting our common humanity. Barriers between companies are eroding as telecommunications technology permits greater linkages and alliances, partnerships, and long supply chains make it difficult to tell one company from another. Global corporations and the financial mechanisms that support them know few boundaries, as evidenced by the global supply chains through which most products are manufactured today. Comparative advantage today comes not just from physical assets and resources like land and raw materials, but also from the skills—or low cost—of the labor force. At the more macro level, societal boundaries are even fuzzier and less clear as markets/economies globalize and the rules and regulations that govern nations become less able to cope with transnational enterprises. Financial capital travels around the world instantaneously to wherever interest rates or returns are best—and companies follow labor costs around the planet as well with little seeming regard for the consequences for the previously employed. But because the knowledge economy depends on the skills of people, the major critical resource is…

Human/Intellectual Capital. In this world, competitive advantage comes more from the ‘soft stuff’ of people assets rather than the hard stuff or physical or financial capital. Corporate cultures, visions, values, the meaning of work conveyed to employees, customers, and investors have increasing value over hard physical assets, and are the main sources of competitive advantage. Integrated processes that rely on embedded knowledge and even technological support that cannot readily be duplicated by others are sources of competitive advantage rather than physical or financial assets. The major need of the knowledge economy is to produce new insights, products, and services based on the linking of ideas…but that in turn means that…

Collaboration and cooperation more than competition is the key to growing knowledge, create new insights and innovations in a world where boundaries have broken down and people truly are companies’ most important assets, which in turn creates a world that is…

Interdependent and highly complex with multiple perspectives and worldviews, and great diversity of cultures and ideologies.. The sheer scope of global activities combined with the interconnectedness and the diversity of the world’s population and societies to create an interconnected, highly complex system. The reality is that we are “all one planet” and that what is done in one part of the world actually does affect what happens in other parts of the world. Out integrated economic system now spans the globe. Policies created in the developed world affect the less developed world. Understanding this reality, as I will argue below, is the essence of understanding integrity in all of its senses, particulate because the processes of technological development and globalization have created…At the same time, there are vast differences among peoples and societies in this one planet—yet we all share a common future.

Dynamic, changing, and incredibly fast-paced—in a world that needs reflective space to think through the new problems we are facing. The world we have created is constantly in flux, with the pace of competitive and economic changes, financial shifts, new product launches and updates, and organizational shifts, restructurings, and alliances creating a chaotic soup of interconnected evolution merging into revolution. It is difficult for individual managers and leaders to keep up—and, arguably, may be unhealthy to try to do so, at least for the sake of the planet and the way that we live our lives day to day.

These aspects of the knowledge economy are truly exciting and challenging. They become even more so when we consider that but a small fraction of the world can currently be considered part of that economy.

The Fracture Paradox: Only Part of the World is in the New Economy

Some societies appear to be faring very well in this new knowledge economy with its associated changes and dynamics. Others are less fortunate, or not really able to participate in the apparent benefits of the knowledge economy. A major challenge of integrity, of which one definition might be wholeness for the world—and one that must increasingly be faced by business leaders and managers, is how to contend with the dissonance, cracks, and other signs of significant social and ecological problems that increasingly suggest that the globalized knowledge world is only part of the picture.