Management: The crucial hunt for tomorrow's company: Bruce Tofield argues that the key to success lies in understanding the power of business organisations to create change

WHEN delegates gather in Leeds on Thursday to discuss the inquiry on 'Tomorrow's Company' being conducted by the Royal Society for the encouragement of Arts, Manufactures & Commerce (RSA), they will have the chance to contribute to an attempt to alter fundamentally the way UK business is done.

The interim report published last month talks prominently about the need to establish less adversarial relationships with all key 'stakeholders', including employees, customers and suppliers.

But if this country is to make progress down the path that has been staked out by the RSA and its contributing companies, a key question remains to be answered satisfactorily. What actually is a company?

Only if we understand this, and how one really works, can we fully understand how to achieve the sustainable business success that is the goal of the RSA's inquiry. Otherwise all is wishful thinking. No amount of training or other input will solve the problems that have been identified.

The answer is simple but dramatic. A company is a social organisation with a unique power to create change. The change is what happens to our lives and to society as a result of what successful companies make and do and the consequences that then flow. Successful companies are powerful at creating change; they anticipate change, they innovate, they adapt, and they modify the environment to maintain their success.

It is management that gives companies this unique power to change and to make change, for it is management that couples vision to action and to deeds. Management, as so often practised, however, fails to deliver. The power of management is not about the exercise of power. More than anything it is about adding value.

Most of us can recall managers who just got in the way or were an obstacle to get around, and possibly also managers who were so removed from what we were doing that it was difficult to know what to do. But most of us have also experienced a manager who made our work make sense, even exciting, someone who reduced the more complex world in which they were working to one that provided just the right context for us to be really productive.

That is value-adding management. It is not magic. It does not arise just through training and it is not a competence that can be learned. It is quite possible to organise, but a different and powerful language needs to be learned. It is fundamentally related to the manner in which people develop the capacity to make good judgements and wise decisions in the face of complexity.

Value-adding management will strive to create the conditions in which people are energised and contribute to their maximum ability. People who are under-challenged will feel frustrated and under-utilised, while someone who is over-promoted will subtract value by making poor decisions and failing to change.

Within many companies and public sector activities, there is, sadly, immense frustration and lack of challenge, which means that, throughout the country, there is massive under-performance as well as a waste of moneyand of people - of those in work and as a result of unnecessary unemployment.

In contrast, powerful companies with value-adding management can be a force for good. They utilise the creativity of people who work for them, satisfying the fundamental human need to gain fulfilment from work, and, because they think long- term, they will be concerned with stewardship of the environment in which they live. People see such a company as fair.

Value-adding companies will be doing away with discrimination because it is inefficient and diminishes power and competitiveness. One meaningful non-financial indicator of success will be whether there is no discrimination against women.

Hence the RSA's search for tomorrow's company has value beyond the need to be competitive, which is its stated starting point. The model of the value-adding company describes the inclusive company that the RSA seeks, one involving not only shareholders but also customers, suppliers, employees and the community.

The RSA report indites many UK companies for short-term profit maximisation, lack of long-term investment, and adversarial transactions with suppliers rather than beneficial reciprocal long-term relationships. Some, like Ferranti, had poor judgement and little added value until too late. The result is the same.

Companies managed in such ways are not getting the added value at the top that their size and complexity demands. When value is subtracted, the results are quite clear. No matter how big they once were, companies will diminish, firstly by slimming and restructuring, and finally to bankruptcy or small-company status, unless they are taken over first.

Appropriate pay is fair for the task of adding value at the head of a major company. But where value is subtracted, there must be many, both inside and outside such companies, who see large rewards for those who have subtracted this value as unfair and wrong.

In welcome contrast, at the RSA launch John Neill, chief executive of Unipart, described the renaissance of his company, which is adding value throughout and succeeding. There will be great employee fulfilment at Unipart but great employee frustration in many parts of IBM - a company whose chairman, Sir Anthony Cleaver, is involved in the inquiry - as well as at British Aerospace, which seem to be diminishing. Good people will leave a diminishing company to join a value-adding one.

The value-adding model provides general understanding and deep insights into management and into specific topics such as quality, re-engineering, the hollow company, and sustainable growth. Only if a company has the value-adding concept built into its fabric can its actual business be done efficiently and competitively. Only such a model can provide the non-financia1 health check that can predict performance and warn of the sometimes fatal coronaries that have attacked the likes of IBM, Polly Peck or Tiphook almost without warning, or of the cancers that sap away the strength of Ferranti or British Aerospace.

It is not a social panacea, but it can help to embolden enterprise.

The author is a business consultant and a member of the RSA inquiry network.

(Photograph omitted)