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Will Hutton

Will Hutton

Principal, Hertford College, Oxford University and chair of the Big Innovation Centre

Wednesday 02 Nov 2011
The people philosopher: exclusive interview with Charles Handy

The people philosopher: exclusive interview with Charles Handy

For the thousands of HR magazine readers whose bookshelves are laden with the philosophies and business musings of leading management guru Charles Handy, his view on HR will come as something of a blow. “HR is a contaminated brand,” he asserts.

And as if that weren’t bad enough, he then admits to being “a bit anti-HR”.

“I wouldn’t call anything ‘HR’. New organisations talk about ‘people managers’. The nitty-gritty of HR should be dispensed with and called something else.”

And it’s not just HR. “I don’t like CSR,” he says, warming to the subject as we talk in the Charles Sheppard-designed room at his home in southwest London, which reminds me of the stunning art deco entrance hall built for the Courtauld family at Eltham Palace (Handy divides his time between this London home and a cottage in Diss, Norfolk). As for strategy consultants: “Really? You are bringing in somebody else to decide your future? Come on.”

The problem, Handy believes, is that all the above are an excuse for organisations to “box the problem”.

“Companies define an issue and put it in a box on the organisation chart and think it is solved. This is the case with CSR and to some extent true with HR,” he continues.

“It gives people the chance to say, ‘I’m a line manager, I am about getting things done and we have an HR department to deal with all the weepy stuff’.

“No,” he confirms, “great organisations shouldn’t have an HR department, if I’m being honest. You should carry HR in your blood. Yes, you need someone to manage the technical and legal bits, but the danger is you allow line management to shunt responsibility for people onto someone else. This is very dangerous.”

But, before HR directors throw their hands up in horror, he offers a salvo: “This doesn’t mean the things HR stands for are not terribly important, but the strategic elements need to be separated out: for example, what kinds of people do we want in the business, what is the structure of the organisation?

No-one is going to put an HR manager on the board unless they are very exceptional and then they are probably calling themselves something else, such as ‘strategist’.”

This clarification will be of some comfort to those readers whose votes resulted in Handy receiving HR magazine’s inaugural Lifetime Achievement award in September, the first on our list to take a place in our new HR Most Influential Hall of Fame.

And, if the Most Influential Practitioner ranking is anything to go by, directors are heeding his warnings: can it be a coincidence that eight of the top 30 in our list do not have HR in their job title?

Handy, who coined the terms ‘portfolio worker’ and ‘shamrock organisation’ to describe respectively a working world where individuals are in charge of their careers and a structure whereby a core of permanent workers is supported by contractors and a flexible part-time/freelance workforce, has always been ahead of the curve – and this is something he himself prescribes for business leaders and workers in his most successful book, The Empty Raincoat (Hutchinson), first published in 1994. In this, he writes about the sigmoid, or ‘S’, curve – the theory being that growth (in the company, your career, product lifecycles or personal relationships, for example) begins slowly, then rises up the curve before plateauing and then beginning to decline. To ensure one benefits from the comfort, money and life afforded by the upward curve, one needs to start a new ‘S’ curve near the height of the current cycle, before the curve peaks.

Not only is this sage advice, but also in this book (as in so many of his published works) Handy proves to be far-seeing. Capitalism, he says, has not proved as flexible as it was supposed to be.

“We were not destined to be empty raincoats, nameless numbers on a payroll, role occupants, the raw material of economics or sociology, statistics in some government report. If that is to be its price, then economic progress is an empty promise.”

It is a theme we return to as we discuss Labour leader Ed Miliband’s division of business into good and bad companies, when he branded private equity firms as “predators” rather than “producers” at his party’s conference in Liverpool in September.

“I agree with a new type of capitalism and understand Ed’s idealism, but think he is naïve and comes across as not understanding business and slightly disapproving of people who make money,” Handy says.

“He is politically stupid to have said this, but I do think companies need a purpose beyond themselves and should see profit as a means to achieve that purpose. If the whole purpose is only to make themselves rich, then they misunderstand Adam Smith.

He said the purpose of existence is to enrich society by employing people, helping customers, redistributing wealth – not through taxation, but through making other people rich, as well as yourself. Good companies understand that, even if they don’t always live up to what they say.”

While defending private equity (though “not sure” he can defend hedge funds), Handy says too many organisations have their priorities the wrong way round, being all about efficiency and making profit – whereas, if you get people excited and stimulated, the efficiency and profit will come.

“People sit in their panelled offices talking to clients and analysts, but not to their own staff. They are all so obsessed with growth. And, if you are growing fast – usually by
acquisition rather than organic growth – you are solving problems all the time. I really wish people would understand you can grow better as well as bigger.”

To illustrate this view, Handy uses one of his favourite analogies – that of an orchestra. If you were to ask members of the London Symphony Orchestra how it would grow next year, he explains, they wouldn’t talk about income or numbers, they would talk about growing their repertoire, their reputation or touring more. Whereas “businesses produce a wretched sales graph”.

“Companies screw themselves up by mistaking the means for the ends. You have got to make money to pay people, invest and keep shareholders happy, but that is not the point. You have to eat and take exercise, but if that is all you do, you are not having a very exciting life.”

Instead, he believes, companies should be led by their passion and purpose, such as voluntary organisations whose annual reports are full of how many homes they have provided for the homeless, how many people their lifeboats have rescued or how many blind people have been given dogs, for example.

“These organisations talk about making a difference to society. You can find this in a company’s annual report, but it is hidden away. I ask businesses, what is your impact on the world? – and don’t give me all this guff about making shareholders rich, don’t give me guff that you are responsible to the owners. You are not. The owners are people who have bought the right to a share in your profit stream and the only right they actually have is to elect the board of directors or sack them. They are basically punters at a racecourse and if they don’t think something is doing well, they take their money out.”

The perfect organisation, believes Handy, is small, with a flat structure. “There is reliable anthropological evidence that once you get above 150, you don’t know all the people,” he explains. “You can stretch this through the way you divide the organisation – you could get up to roughly 500 people. A good school can go up to circa 600 people because those people are there for five to six years and a good head would know all of them.”

But, given many organisations today are large, complex and global, he is a strong advocate of federalism, a concept he espouses in The Empty Raincoat and later in The Elephant and the Flea.

“If you are going to have to be big, then for God’s sake keep the component bits small and give as much independence as possible,” he states.

This can be achieved, he believes, through the concept of ‘twin citizenship’: a historic principle of federalism Handy believes is not well understood.

“Just as you can be proud of being Californian, but still be American, so you can be proud of being a little unit in Scotland but still part of something bigger,” he says.

As such, he is scathing about corporate branding, pointing to Aviva as just one of the
companies that have replaced well-recognised brands (in this case, Norwich Union and Hibernian in Ireland) with corporate entities.

“I think they are crazy – stupid names mean nothing. Companies say to maintain a global company you have got to have a global brand. I say, nonsense; you can have your own identity. People can’t relate to anything that is too big,” he says.

To enable a federal company to work, it needs reverse delegation, Handy explains. “The constituent parts have to say what the centre has. Typically, the centre has new money and new direction – the strategy and money for investment. It also controls a core group of people and will want to run the information system. It will likely retain some legal division and sometimes HR, which could be given to one of the constituent companies to run on behalf of the whole. There is a small centre, but it is quite powerful. But no-one is doing this perfectly,” he says.

So why hasn’t business adopted this organisational structure? Handy believes it is because the centre wants power and doesn’t trust the parts. “You see it in governments that say they want to de-centralise and then end by building up the centre. If you want to do this, you have to give financial responsibility.

It is the same in business. The parts should be allowed to keep the money they need to run the business and pass on a dividend to the centre. So, for example, if they want to pay people differently, they can do. HR is just as bad – it wants everyone to do the same appraisal system or whatever. The important point is that the centre should not be about current money, it is about new money.”

He is circumspect about the fact that no-one has been able to make this system work well. “My job is to spell out the basic principles. The danger is that over time the tweaks become more dominant than the principles,” he says.

With challenging theories such as this, it is no wonder Handy has sold nearly two million copies of his books globally. Those who voted for him in HR’s Most Influential 2011 described him as “the original”, “a great thinker and communicator” and someone “others only imitate”. His ideas are “innovative and reflective”, says one HR director, while another says he is a “baseline must-read”. He is “inspiring” and, despite a body of work that goes back more than three decades, his “theories still stand today”.

While his family points to his autobiography, Myself and Other More Important Matters (William Heinemann), as his best book, Handy’s own favourite work is Hungry Spirit (Random House), in which he sets out his vision of what capitalism could be about.

He starts it with an African proverb that says there are two types of hunger: hunger for food and hunger for meaning in what we do. “I address the spiritual hunger,” he explains. “This is not often found in large organisations, which are a prison to the human soul, to a large extent.” Addressing this hunger is important, because work is still the dominant determinant of our lives, believes Handy.

“Work is essential to society. My thesis is that work is changing. It is becoming ever more individualistic. This is both problem and
opportunity. In a splintering society, we need other kinds of ways to bond people together. Work is absolutely critical to society – it changes and defines it.”

Work may indeed do this, but for many in business it is Handy himself – the self-styled social philosopher – who is really changing and defining work today.

A Handy guide

Charles Handy has been writing and broadcasting about organisational behaviour and management for more than three decades and is a must-read for people in the field. One HR director describes him as being “as close to a people philosopher as you can get”.

In July 2006, Handy was conferred with an honorary doctor of laws by Trinity College, Dublin. Born the son of a Church of Ireland archdeacon, Handy was educated as a boarder at Bromsgrove School near Birmingham and Oriel College, Oxford.

His business career started in marketing at Shell International, where he worked from 1956-1965. He was an economist at Charter Consolidated between 1965-1966 and an international faculty fellow at MIT between 1966-1967. He was a co-founder of the London Business School, working there between 1967 and 1995. He has been warden at St George’s House, Windsor Castle and a writer and broadcaster since 1977, best known to the wider world as presenter of ‘Thoughts for the Day’ on Radio 4’s Today programme.

Handy was chairman of the Royal Society from 1987 to 1989 and has honorary doctorates from Bristol Polytechnic (now the University of the West of England), UEA, Essex, Durham, Queen’s University Belfast and the University of Dublin. He is an honorary fellow of St Mary’s College, Twickenham, the Institute of Education, City and Guilds and Oriel College, Oxford. He was awarded a CBE in 2000.

Handy is the author of the following books: Understanding Organisations (1976), Gods of Management (1978), The Future of Work (1984), Understanding Schools (1986), Understanding Voluntary Organisations (1988), The Age of Unreason (1989), Inside Organisations (1990), The Empty Raincoat (1994), Waiting for the Mountain to Move (1995), Beyond Certainty (1995), The Hungry Spirit (1997), A Journey through Tea (1997), New Alchemists (1999), Thoughts for the Day (1999), 21 Ideas for Managers (2000), The Elephant and the Flea (2001), Re-invented lives (2002), Myself and Other More Important Matters (2006), The New Philanthropists (2006).

Handy is married to Elizabeth Handy, a photographer, with whom he has collaborated on a number of books, including The New Alchemists and A Journey through Tea. Their son Scott Handy is an actor who has worked for the RSC.

Charles Handy on

Starting out….

“When I started work after university I joined an organisation, Shell International, but it could have been any big business. They drew a line in my initial interview of my life with them. I’m glad to say it went upwards but basically they said that, if all went to plan I would end up as an MD in my 50s of a country somewhere.

“The thing was they expected to look after my career until 62 and pointed out that I would live to 18 months after I retired because no life was worth living after Shell.

“I wrote to my parents at the time and said my life is solved. At the time large organisations in business and the public sector were stable communities of society. Whether it be the steel works, shipbuilders, a mine or Procter & Gamble, they were the training grounds, the business gurus of the time. It was a lifetime contract of one sort of another.”

How work has changed…

“This just doesn’t happen any more and with that goes all sorts of consequences. There is now no stable community to which one belongs, unless you think your Facebook community is stable, which is highly unlikely.

“I think that is very disruptive. This is so important for HR as now the individual is responsible for his or her own career. This was brought home to me rather dramatically by Elizabeth [Handy’s wife] when Shell wanted me to be a CEO in Liberia and Elizabeth didn’t want to go and said ‘I really don’t want to be married to a man whose life is totally dictated to by a company which tells him where to go and what to do and will in a funny way define what success is for him’.

“This was a shock to me as I thought solved life. She was saying I should define my own life and my definition of success. I found that strangely frightening. But it was Liberia or Eizabeth…and I chose Elizabeth.”

How this influenced his thinking…

“I then became professor at London Business School and started writing books – developing the idea that freedom is more important than security. You could have a portfolio life where the organisation basically helps you to develop yourself in return for which they get first choice, if you will, and hope you will stay there.

“The bargain has subtly shifted. When I was at Shell loyalty came top of the annual appraisal – you couldn’t do that now. People are loyal in first case to their own professional prospects, then to their team or project and only thirdly to the organisation.

“Organisations took some time to understand this, they expected people to be patient and wait until their mid 40s before they gave you something. Firms took a long time to realise the contract had changed.”

Managing top talent…

“It’s a nice slogan but what does it actually mean? I really don’t know. I don’t think people are particularly long term as individuals – they want to pay off mortgage and then do what want to do, so if there is a nice tempting job offer they go for it.

“It’s a great shame as you need to stick around a bit to make sure you are practicing your talents best way. Organisations have got to be careful to offer nice opportunities to the best people – money comes with it but really it is about the opportunities to improve yourself.

“I think everybody has got talents. Sometimes they don’t know the talents they have got. In an enormous amount of cases they have not had the opportunity to discover or show if off. When people say they don’t have the right talents, what they mean is that there are not people wandering around saying I am a highly qualified entrepreneur. Talent is lurking there in the organisation, it just has not been given the chance to show those at the top.”

“Managing talent about helping people to develop themselves. Some will leave and should leave you.

“Technical skills are obviously important but you can learn those. It is much more difficult to learn attitudes, aspirations, the desire to tackle exciting new jobs, energy etc.

“If you are working on a start-up project it can be tremendously exciting watching people discover talent and skills. If they are motivated they can learn anything within reason. I am never going to learn to be a tightrope walker but probably earlier enough in life I could have.

“I think there is a shortage of aspiration rather than shortage of skills.

“Countries manage things differently. I think we have got lots of good managers. I worry organisations have got too complicated and that it has got difficult for managers to manage how they would like to manage.

“I did survey for the Government in 1980s comparing management education in five countries and discovered in 1985 of all the people over 50 in Britain only 8% had been to school in any formal sense after age 15.

“Those 8% mostly went into professions or Government and it meant that British management mostly left school at 15.

“No wonder we are lagging behind, you need ability to re-think world and so on. The best people we had at LBS people who taken history as first degree because what history teaches you to do well taught is to piece together a picture (not just dates) so it’s useful in management.

“If you talk to people in successful entrepreneurial businesses, it’s not money they talk about.”

Leadership…

“I talked to a CEO of one global company and said CEOs usually say they spend a lot of time with people. He said ‘I am a missionary, I am going round the world spreading word about what we are, meeting key people and talking about what type of people we want’.

“I think that is very much the job of the chief executive. Once you are up there it is about setting the mood, taking priorities, having an instinct and being in the grapevine of the organisation. You somehow have to find a way of dropping down.”

What he wished he had written…

I don’t really like business books but I think Lynda Gratton’s last book [The Shift] is really great. It is in tune with my thinking.