Consensus: The Death of Competition for the Modern Corporation

It seems that only yesterday W.E. Demming took his unappreciated statistical methodology to Japan, and in less than 30 years the Japanese overtook the U.S. to become the #1 automotive industry in the world. But if anything we have learned is that even the best of intentions may just fail if there is complacency and lack of a leadership for organizations big and small. Toyota, the indisputable leader in worldwide automotive sales for many years, has just recently come to the conclusion that trying to design a car by a 100 people committee it is too slow for today’s global market.

Management by Consensus

Image courtesy of www.ntrf.org/
Image courtesy of www.ntrf.org/

Management by consensus (or by committee), has been adopted by multiple Japanese, European, and U.S. corporations because of it’s innate mass attraction. A committee in a corporation can give its members:

  1. An almost guarantee to be better known and get a promotion (just think on the power of the actors after they are part of the “Oscars”)
  2. The ability to hide his/her weakness just by waiting to see what is the main trend of the group and basically just paraphrase what everybody else has already said.
  3. The possibility to avoid individual responsibility and by extension, accountability for their decisions. In other words, nobody in the executive office gets fired if things go wrong (since everybody agreed and voted in favor of the idea, we can’t fire every CXO at the same time “or could we”?)

On the other hand, committees may not act on the best interest of company customers, employees, shareholders, and stakeholders in general. Committees are plagued by many well known issues such as:

  • Self interest (Agency Theory)
  • Groupthink (Politics)
  • Slow to respond to market challenges (Lack of Innovation)

So as it is happening at Toyota, today’s companies must decide if they want to continue to manage by committee, stop being politically correct, and actually behave more like professional sports teams, where membership is based on individual performance and politics   is kicked off the sports court. Recognizing this challenge Deresky (2006) wrote on his book International Management:

Corporate Japan is changing from a culture of consensus and groupthink to one touting the need for an “era of personal responsibility” as a solution to revitalize its competitive position in the global marketplace.

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 Management by Consensus: The Death of Competition for the Modern Corporation

While we all can agree that an organization (call it a Corporation, a Government) it is a team and needs to work together towards their objective if they are expected to succeed, there is a substantial error in believing that we all have to agree on the decision on the name of Team Building. According to Myatt [2] “while all people are created equal, they are certainly not equals in the workplace”, and ignoring this fact may have contributed to the substantial decrease in the competitiveness of many organizations in the latest decades. There is a substantial difference between getting the input from a team of experts (Delphi Methodology) and then someone makes a decision based on that input, and expecting that everybody will provide their input and debate it until everybody is happy about the decision (consensus). The later is great for academic halls where a group can debate to their hearts contempt, even if it takes years to reach the almost perfect decision (and still you will have potentially another group of academics that may reach the exact opposite conclusion), but that approach will not work for organizations that need to respond to the rapidly changing market needs, and the recent examples of Cisco Systems, GM, the U.S. Government, and many other political organizations may be the best argument against the Management by Consensusmodel.

References and Related Articles:

  1. finance.yahoo.com/news/toyota-drops-plain-vanilla-styling-181800503.html.
  2. Consensus – Team Building Silent Killer: Mike Myatt, Forbes 2012
  3. Why the Best Leaders Shun Management by Consensus, Don Tennant, IT Business Edge 2011
  4. Is Management by Consensus Killing Innovation: Roy Luebke, Innovation Excellence 2010

 

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Jorge Mastrapa

Managing Director at Inloso LLC
Dr. Jorge Mastrapa is an international author, speaker, executive coach, and entrepreneur. His areas of expertise include cultural diversity, global leadership, organizational culture, and human capital management.

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CC BY-NC 4.0 Consensus: The Death of Competition for the Modern Corporation by Inloso is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

About Jorge Mastrapa

Dr. Jorge Mastrapa is an international author, speaker, executive coach, and entrepreneur. His areas of expertise include cultural diversity, global leadership, organizational culture, and human capital management.

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