Read my article ‘Skewed logic on managers’ bonuses’ in FT Business Education 17 May 2015, here

A year ago, I posted an article about the struggle for the soul of Botton Village, a remarkable but unconventional ‘intentional community’ of some 200 learning disabled and volunteer ‘co-workers’ living and working together in a tucked-away hollow of the North Yorks moors. I won’t retell the full story here, but in brief the issue is one of baby and bathwater: can a successful but unusual 60-year-old care model survive a box-ticking, politically correct care world, and in particular the attentions of its own management, drafted in from outside to make Botton and Camphill Village Trust’s other communities look more ‘normal’ to its funders and regulators?

It’s a perverse and tragic case of an organisation divided against itself. While most organisations would die for the kind of passionate support that the Camphill model engenders among its beneficiaries and their families, CVT managers seem bent instead on extinguishing the ethos of shared living and collaborative management that is the source of that commitment. Changes have been pushed through that leave co-workers feeling marginalised and in some cases bullied, with the result that many have left, in effect turning some CVT communities into little more than standard care homes that are certainly easier to manage according to a conventional rule-book but show little trace of the founding Camphill principles that have spawned successful communities all over the world or of an increased happiness dividend in return – in fact the reverse.

Here’s the nub. Running a community full of vulnerable people with complex needs is a daily balancing act. Ensuring that residents are safe and winning the confidence of regulators and funders are obviously essential. And that, as regulators confirm, has now been achieved. But as supporters insist, what makes Camphill unique – and why it arouses such extraordinary passion – is what it does beyond keeping residents safe and ticking funders’ boxes. That extra is largely provided by the co-workers and their families ‘who made Camphill what it is’. ‘Camphill is more than the sum of its parts, and a system that only feeds the parts isn’t going to get the X-factor,’ says a parent. Being discretionary, however, the extra can’t be summoned up by management command, and it can’t be accessed at all by those who don’t understand or empathise where it comes from. ‘Putting non-sympathisers in charge is a bit like installing an atheist as archbishop of Canterbury’, says another relative. What were the trustees who appointed them thinking?

Hence today’s impasse. But residents, parents and many co-workers have not changed their mind about what they value, nor are they giving up on Botton, the centre of resistance, without a fight. Although the story has been studiously ignored by all the national press save The Guardian, Private Eye is on the case (listen to Heather Mills’ excellent podcast summary here), and a vigorous Action for Botton campaign group has drummed up vociferous local and national support as well as the interest of 30 MPs, including care minister Norman Lamb and David Cameron. Green MP Caroline Lucas has put down an Early Day Motion on Botton for debate in Parliament.

The campaign groups have also taken the matter to court. To simplify, while one case arguing that CVT’s actions amounted to a breach of Botton residents’ human right to family life was rejected, a separate agreement with a ‘reluctant’ CVT reached in the High Court at the beginning of May allows a modified version of shared living to continue pending formal legal mediation, due to take place in the next two months. If mediation fails, the High Court will hear a claim by 23 claimants that CVT trustees are acting ‘ultra vires’, that is exceeding the powers allotted them in the charity’s Memorandum and Articles, by attempting to abolish shared-living and collaborative management arrangements contrary to the core principles that the board is supposed to nurture. Legal concern has also been expressed over whether the charity’s membership roll has been used to influence voting and over the opacity of its finances. In giving permission for the case to go to court, the Charities Commission voiced disappointment at CVT’s refusal to accept mediation until compelled to by the authorisation of court proceedings.

Where does that leave things now? The CVT management juggernaut has certainly been slowed, and the slap on the wrist by the Charities Commission may represent a cautious change of attitude by a body that in the past has shown more interest in protecting its own back than underlying principles. But the momentum hasn’t been halted, and given the utterly different operating philosophies of the two sides, it’s hard even to imagine what a negotiated compromise might look like. So lengthy and expensive litigation is a real possibility. Meanwhile the war of attrition on Botton’s way of life goes on, with unsettling daily consequences for those least able to resist or cope with them.

The stakes are high, and not just for vulnerable individuals and their families. As well as a tragedy in its own right, Botton is a microcosm of public service caught between a defensive, regulatory state on one side and voracious commercial outsourcers on the other, both focused on delivering the same mass-produced, lowest-common-denominator services at minimum cost. What price then a frugal Camphill that circumvents these constraints by adopting a diametrically different approach; where residents think of their communities as families, not care homes, and co-workers qualify the 24-hour care that they in effect provide not as work but family life? If Botton didn’t exist, it would have to be reinvented.

Doubtless without intending to, CVT’s trustees landed the charity in today’s awful mess. The coming mediation gives them a chance to put it right. By changing their minds and standing up for what they must know in their hearts to be thr right thing for the individuals in the charity’s care, trustees and CVT management have an opportunity also to raise the standard for a better, more human kind of public service – a worthy update of the ambition of Botton’s founders in the first place.

In a world of sound and fury, where wildly spinning electoral words seem utterly unconnected to anything real, reading Charles Handy’s latest book, The Second Curve, is agreeably calming. This is not because Handy, perhaps our wisest thinker on work and society, is an unconditional optimist, nor that he has all the answers – in fact he spends a lot of time pointing up rather difficult problems. It is rather that, at the far extreme of the spectrum from the rabid utterances of electioneering politicians, his collection of essays, subtitled ‘Thoughts on Reinventing Society’, brings to bear on them a deceptive simplicity that disarms panic and invites cool consideration instead.

It’s deceptive because, in Oliver Wendell Holmes’ description, these thoughts are ‘simplicity the other side of complexity’, born of a lifetime of reflection, the matching of thought to experience. In truth the depth and breadth of the latter are the only sign that the author is now into his ninth decade. His overall theme, also deceptively ‘low-definition’, is the metaphor of the sigmoid curve, the ‘S’ on its side that seems to define the arc of life, whether of individuals, organisations or societies, and he applies it with unobtrusive deftness to the DIY economy, the workplace, the digital revolution, the market, the dilemmas of growth, the future of capitalism, the challenges of democracy, and self-actualisation. in a political context, Handy’s book, alongside John Seddon’s The Whitehall Effect, should be prescribed reading for every voter wanting to ask politicians real questions before the election.

The thread running through it all might be the famous quote from Giuseppe di Lampedusa’s The Leopard (which Handy uses), ‘Everything must change so that everything can remain the same’. What endures, ‘the still point of the turning world’, to borrow T.S. Eliot’s phrase, is humanity, the necessity of others, the search for individual meaning. How to ‘fix’ humanity when it its essence is under attack from several quarters – a winner-takes-all-economy, the centripetal market forces atomising society, relentless commercialisation and the surveillance business model – is the central challenge that Handy addresses.

As he concedes, there are plenty of things to worry about. ‘Society is not working as it should,’ he writes. ‘Living is getting harder, not easier, for most. Inequality is growing. Wealth is not trickling down.’ One of the most striking essays, ‘The Ponzi Society’, is the best account I have read of the stark consequences of societal failure to measure the implications of the tectonic shift from state-managed welfare provision to much greater self-responsibility. ‘We have to learn how to educate ourselves in areas [such as financial literacy] that we did not need to worry about before, because someone else was taking care of them’ – even if not very well. In the area of work, too, he notes that ‘We can no longer rely on the institutions of education and the workplace to prepare us for life and looks after us during it. It was too easy in the past to let others direct our life’.

Yet while acknowledging the severity of the challenge, Handy remains resolutely positive about the future. It defies belief that human constructs like organisations, markets and the polity can’t be intelligently reshaped by new generations of humans for a new era. The idea of the ‘second curve’, a new sigmoid figure that, with initiative, intelligence and a dose of luck, can spring out of the first before it reaches its peak, is inherently optimistic, although never easy, and to his credit Handy does not shy off some of the dilemmas that new curves might confront. Difference, though, is always better than more of the same. The optimism is also, I think, that he believes fundamentally in humanity and its ability, with a little help from its friends, to remain human despite (nearly) everything that the forces of inhumanity, including technology and markets, can throw at it. Prey to all sorts of ills and temptations, people are still redeemable. As a long-time observer of the work of work, he quite likes the idea of replacing the patriarchal father-child employment relationship of the past with grown-up adult-adult relations, even if they do demand much greater self-reliance (or a greater awareness of themselves and their role in society) in consequence.

Second curves are neither necessarily easy to spot or obvious to implement. But some of the clutter and complexity that obscure them falls away when some important but very often unexamined confusions are cleared away. This is classic simplicity-beyond-complexity, and Handy is very good at putting his finger on the most sensitive spots. If politicians, managers and citizens could rigorously distinguish between debt and deficit, efficiency and effectiveness, management and leadership, difference as clue to the future and difference as something to be stamped out, and above all ends and means (beware the tyranny of intermediate goals), the perilous route through our major dilemmas would be considerably less cloudy.

In the end, good management, suggests Handy, ‘is only common sense at heart, just not in common use. Add in an interest in those you work with, some decent humility, a will to listen and a desire to see a job well done and you have leadership theory in a nutshell.’ That’s worth the price of admission alone. One of Handy’s most generous qualities is his confidence in the young, whom he urges not to be held hostage to the past. If they have the sense that he attributes to them, however, new generations will pay a great deal of attention to the measured thoughts of this particular elder as they plot their Second Curve out of the wicked problems they have been bequeathed.

Here’s an instructive and uplifting business story for Easter. It’s not a factory or office. It’s on show in London in a dazzling National Gallery exhibition, ‘Inventing Impressionism’, that runs to the end of May.

The 85 paintings – Monets, Manets, Renoirs, Pissarros, Sisleys, Morisots and those of other usual suspects – are of course spectacular, particularly wonderful for me being less familiar ones such as revelatory views of London by Sisley and Pissarro as well as the more famous Monets. Also extraordinary are two dispersed and thus rarely seen series of paintings by Monet and Renoir that have been reunited again for the exhibition.

Just as extraordinary, however, is the story behind them. What almost all the paintings have in common is that they passed through the hands of a man who has more claim than the individual artists themselves for inventing ‘Impressionism’, in the sense of a category that along with cubism is perhaps the best known, most easily recognisable and not least highly valued art movements in the world: the Paris dealer Paul Durand-Ruel. Without Durand-Ruel, ‘Impressionism’ qua movement wouldn’t have happened.

As everyone knows, ‘Impressionist’ was first used as a derogatory term by a derisive critic who borrowed it from the title of a Monet painting, ‘Impression, sunrise’. This is actually not one of the canvasses on show. But as with around 1,000 other paintings by Monet, not to mention 1,500 Renoirs, 800 Pissarros, 400 Sisleys, Boudins and Degas,and 200 Manets, it was handled by Durand-Ruel, who made it his life’s work to have their artistic and financial worth recognised at a time when most critics were ridiculing the artists as lunatics and their paintings as daubs that no one would conceivably want to hang on their walls.

Duran-Ruel was initially a reluctant art dealer, joining the family firm (which still exists) after having his mind forcibly changed by an exhilarating exhibition by Delacroix. He turned out to be a brilliant entrepreneur (as he needed to be to prove the doubters wrong), who eventually did well extremely out of the group – but not before he had twice flirted with bankruptcy when he had little to fall back on except faith in those he had backed.

He had begun buying the ‘new painting’ after a chance meeting with Monet and Pissarro in London (which has a gratifying cameo role in the story), where artists and dealer had removed themselves in 1870 during the Franco-Prussian hostilities. He was blown away by the freshness and vigour of their portrayals of the city. His large-scale buying, which for some painters had kept body and soul together in their early struggles, came to a stop with a banking crisis (so what’s new?) in 1874. But instead of selling up and moving on to something easier, he did what entrepreneurs are supposed to do: he innovated. He lent paintings for the famous First Impressionist Exhibition and put his gallery at the disposal of the second. With confidence returning, he used techniques borrowed from finance to drum up backing for revolutionary business strategies such as one-man shows, exclusive deals, advertising to build awareness, and stock building to manage demand.

In the second crisis (another banking crash) a decade later, Durand-Ruel again took the bolder option – this time expanding into foreign markets, with eventually galleries in New York and Brussels alongside those in Paris and London. The turning point for the fortunes of both the Impressionist artists and their untiring champion was a 300-canvass show in New York in 1886 which for the first time reaped commercial and critical acclaim. Then as now, where rich Americans led, others followed, first in Germany (where he sold the first Cézanne to a public gallery), then in London, where a monster show at the Grafton Galleries in 1905 remains the largest and by general consent most impressive exhibition of Impressionist art ever seen. Of the 315 works shown, no less than 196 came from the dealer’s private collection. Although commercial sales only came later, the London exhibition ‘fixed’ the impressionist identity for ever as the starting point for the history of modern art. Almost single-handedly, Durand-Ruel had defined the contours of the modern art market.

Art histories don’t often concern themselves with vulgar matters like finance; this exhibition offers an exhilarating corrective. Business is an essential part of the story. From that perspective, several things stand out. The first is that the art came first. Durand-Ruel lived it, breathed it, collected it and hung it in his own home to show (and sometimes sell) to visitors. To keep the work coming he supported his artists by buying in bulk, paying them monthly salaries against future work, and settling bills. He backed his judgment with sizeable investment: visiting the then controversial and scandalous Manet, he block-bought the entire contents of his studio, 23 paintings, on the spot, with no guarantee of a ready market. His artists mostly repaid him (as you would) with loyalty and gratitude. ‘Without him,’ said Monet, ‘we wouldn’t have survived.’

Today Durand-Ruel might well look askance at the art market his efforts spawned, where prices often seem only determined by fashion. Be that as it may, it remains true that artistic creativity without backing stands on one leg. It’s hard to credit it, but without the dealer’s commercial inventiveness to complement that of the artists, Impressionism might be just a footnote in art history and our sensibilities to both painting and the world that surrounds us different and just that bit narrower.

Read my reflections on the March 2015 Foundation Forum, ‘Customer-led growth – un-unatural impossibility or the route to success that lasts?’, here

The good news, sort of, in this story is that it demonstrates why technology doesn’t work without humans. Hurrah. The bad news is that that doesn’t stop people from trying to do just that – and thanks to new technology they can get away with the dismal results for quite some time.

As you can see from the website, the Park&Suites Prestige hotel is a smart-looking new hotel in the business district that has sprung up around the Bibliothèque Nationale de France, the French National Library, in Paris. The rooms are compact and full of self-catering gadgetry to minimise the need for staff – a Nespresso machine, microwave and micro-washing up machine. They’re neatly designed (I took a couple of admiring photos). But in the room we occupied a couple of weeks ago the blind didn’t work, which mattered since the room was overlooked, and there were no instructions, so we phoned the desk. Or we would have done, except the phone was dead.

Without fuss, the receptionist moved us to another room. (We later decided she was unfussed because she was so used to doing it.) At that point it was time to go out to eat. Next morning, we discovered that there was no hair dryer in the bathroom, as promised; in its place there was a loose piece of plastic covering the wires that it should have been connected with. To cut a long story short, by the end of the day we had counted seven things missing or not working in the room, including the TV, which a technician came to fix but couldn’t. The heating in the large and glacial breakfast room had also broken down. If we could have eaten breakfast wearing gloves, we would have.

The bed was comfortable, the room clean and warm, so we weren’t seriously inconvenienced by the shortcomings – the catalogue of failure became almost comical. All that was lacking was a hotel manager called Basile. But €140 a night, supposedly a special ‘university rate’, was less funny, and even though the four-star status claimed was indeed a joke, it was a poor one. Even in a one-star establishment you’re entitled to expect it to fulfill its side of the contract. As it was, a glance at TripAdvisor confirmed that our experience was by no means unique, and among some satisfactory reviews were others that were almost unprintably rude.

Hence the first inescapable conclusion. It’s all very well designing a business to run with minimal staffing, but you still need someone in charge who cares. In fact you arguably need the human and management element even more.

So how do they get away with it? The answer is, confusion marketing. Looking at TripAdvisor, we made a disconcerting discovery. The ‘spot’ price for our room the night we were staying was not €140 but €99. As the young woman on the front desk confirmed, as in the case of airline or Eurostar seats, there is no ‘normal’ price for the rooms – it varies according to demand and timing. When we were offered the university rate for an extra night we naturally assumed it was the best available. But no: the university had done an annual block deal with the hotel at the fixed rate of €140. And no, although she accepted we should have been offered the lower rate, she was not empowered to make a refund, even taking account of the additional litany of failure. We’d have to write in for that.

So this is a small but comprehensive market fail of the sort that is just not supposed to happen in this day and age. To work for a customer, technology still needs a complement of human brain and affect – sympathetic management, in fact. Here, when technology went on the blink (as it does), humans weren’t empowered to put things right either literally or figuratively. The vaunted price transparency and thus informed choice supposedly enabled by the internet – customer empowerment – was an easily manipulated sham. If, as seems likely, Park&Suites had done similar block deals with other inattentive organisations in the area, the disconnect is complete and accountability reduced to nil: individual customers can rant and raving all they like on TripAdvisor or Twitter without making the slightest dent in the hotel’s monumental indifference. Never mind new technology: the old principle of caveat emptor still applies. And no, we wouldn’t recommend you staying at this hotel.

Stuart Gulliver’s extraordinary ‘not me guv’ self-defence in the HSBC tax evasion scandal shines a dazzling light on a lot that’s brazenly wrong with modern management. ‘Can I know what every one of 257,000 people is doing? Clearly I can’t,’ Gulliver protested plaintively about the practices of HSBC’s Swiss private bank, before going on to defend holding his annual bonuses in a Swiss private bank account via a Panamanian company on the bizarre grounds that ‘being in Switzerland protects me from the Hong Kong staff. Being in Panama protects me from the Swiss staff.’

Where to begin? No, of course he can’t know what everyone is doing. But that doesn’t mean he wasn’t responsible for what was done in the bank’s name. As Andrew Bailey, a deputy governor of the Bank of England, put it recently, ‘At the heart of this is a very simple principle. You can delegate tasks and work, but you cannot delegate responsibility for the safety and soundness and conduct of your firm.’ As for the argument that bankers are being held to higher standards than bishops, that’s just laughable. A former merchant seaman who came up the hard way to become HR director of a subsidiary of a US multinational reminded me recently that a ship’s captain is responsible for what happens on his ship, full stop. That’s it.

Or try it another way. No, of course he can’t know what everyone is doing. But too big to manage isn’t and can’t be an excuse. Responsibility for safety and conduct requires that either a company does not expand beyond the size that can be managed, or, if scale really is essential, it must have measures in place that allow managers to be confident that its integrity, and their responsibility, remain intact, despite not knowing what everyone is doing.

One precaution is structural. W L Gore, the exemplary private company that invented Gore-Tex, just keeps on growing, but at the same time keeps its units small. When a Gore unit reaches around 200 people in size, a new one is split off, often as part of a cluster of similar-sized companies close enough to foster knowledge synergies, but formally separate in order to encourage ownership and identity.

But while favourable structure can make proper management easier, it’s not in itself sufficient. The number one guarantor of integrity is purpose and values. These are two notoriously slippery characters, but – and a contrario in the case of HSBC’s tortured secrecy – you know them when you see them. Values, as someone wisely once said, are what you are willing to enforce. Values and culture do scale, but like light or computer memory, they need constant current to keep them operative. They are also subject to contamination, which is yet one more reason why acquisitions of companies with different value systems should be handled as carefully as high explosive – as HSBC, if it thinks about such things, is now discovering to its cost.

‘Management’ in the modern sense has several midwives, but one of the most influential was the railway. Predictable and regular dispatch and arrival of cargoes of people, over distance, required rules and basic standardisations (including time, which previously varied from city to city, and safety and other protocols). It also meant that many rules were simply non-negotiable, in some instances trumping status – in matters of safety a signalman or driver had to be able to overrule everyone else, however senior. Shared values of this kind are how Gore works. Unlike the railways, Gore operates largely without rules or bureaucracy, but governance is ensured by militant adherence by associates, who are co-owners, to the company creed of innovation, peer pressure and shared purpose – a much better way of keeping top management accountable, in the view of CEO Terri Kelly, than box-ticking or relying on outside rules.

The benefits of size are habitually exaggerated, and the incentives to achieve it – higher pay for senior managers, greater market power and weakened competition, greater influence over politicians – mostly perverse, benefiting the same senior managers at the expense of society as a whole. Numbers may count in military encounters, but not inevitably; there are no necessary economies of scale in human terms. That said, I don’t buy the ‘too big to manage’ fatalism. Big doesn’t have to be ugly, just as small isn’t automatically beautiful (from experience, ‘my conclusion was, you need two people to make a bureaucracy,’ Henry Mintzberg remarked recently). Just as it has been said that there are no mature markets, only mature management, so here the real issue is not that the company is too big (although it may be) but that management is too small.

As a business writer, it’s hard work being an optimist these days. It’s not that there aren’t potential good news stories out there in both public and private sectors, nor that creative thinking – and thoughtful practice – aren’t going on in the background. But you wouldn’t know it because the pall of the dominant narrative is so heavy, so all-blanketing, that no hint of an alternative can leak out.

And despite the cynical political boasting of economic and employment growth, the tone of the underlying ‘official’ narrative is overwhelmingly pessimistic. It takes the form of gloomy variations on Mrs Thatcher’s notorious TINA (‘there is no alternative’), constantly repeated until anyone querying them risks being ferried away by men in white coats. Thus in the public sector the conventional wisdom tells of remorselessly increasing demand and sense of entitlement, leaving authorities no option but to beat it back by rationing, reducing service levels and cutting costs, not to mention importing the ‘discipline of the market’. In the private sector, it’s the pressure of capital markets that is adduced to justify paying fortunes to bankers and CEOs, while the firms that they run can apparently no longer afford first pensions, then career, now full-time employment or even a living wage (the narrative glosses over the fact that 80 per of the £6.5bn paid out in Working Tax Credit goes to subsidise poverty wages in the private sector, mainly in retail, care and hotels and restaurants).

In fact, none of the conventional wisdom is true, or at least not that it is inevitable. What we see is actually the result of poor choices, whether made by politicians or business or both. Thus it’s not underlying demand for public services that’s ramping inexorably up; it’s failure demand inflicted by an outdated, unfit management model. Excessively high and low pay in firms does not happen by virtue of natural law; on the contrary, they are reverse sides of a single coin, directly linked by the incentives that have been deliberately (mis)designed to align the interests of managers with those of shareholders.

If choices are made, they can be unmade too. Unfortunately, unpicking them is made harder by two powerful second-order grounds for pessimism. The first is that today’s prevailing management model, being based on a fundamentally dark view of human nature, is itself gloomy, justifying sharp top-down application of carrots and sticks to oblige opportunist workers to do their jobs. The second reason is that these and other perverse assumptions the dominant narrative is based on remain hidden because of the media’s shameful failure to question them or the vested interests that they serve, let alone construct a more convincing alternative narrative. In an excellent recent article in the London Review of Books (it takes a literary journal to do a proper sceptical job on economics, apparently), Oxford economics professor Simon Wren-Lewis shows how to a man the media have bought the government’s ‘no alternative to austerity’ line in the face of compelling evidence that it is being deployed not for economic benefit (we are all £1500 worse off as a result) but as an excuse to shrink the state. Austerity, he says bluntly, is a con.

At least economics gets a hearing; the idea that there are choices to be made in the way companies are run and directed is raised only tangentially in the press, if at all. Thoughtfully reviewing Will Hutton’s new book, How Good We Can Be, Peter Wilby correctly describes the nature of New Labour’s historic betrayal: after a brief flirtation with the idea of stakeholder capitalism, he writes, ‘far from bringing the public interest to bear on the private sector,… New Labour brought the private sector and its values to bear on the public sector’ through measures like PFI and the NHS internal market. That’s spot on. But even the perceptive Wilby falls for the prevailing determinism, adding that instead ‘Labour preferred to leave the free market undisturbed’ – as if there was anything free or given about a market consciously rigged in favour of shareholders during the arch-ideological Thatcher and Reagan years. That too was a choice, an audacious and foolhardy one, whose results we are not only still living with but doing nothing to challenge.

Testimony to the corrosive effect of the gloomy narrative and its accompanying determinism is the meek acceptance of another bogus inevitability, the race to the bottom. So ingrained is the notion of private good, public bad, and so strong the cognitive dissonance from asserting that there is an alternative, that instead of reacting logically – demanding that companies live up to their responsibilities to all itheir employees, not just CEOs – there are increasingly strident media and political calls for ‘feather-bedded’ public-sector workers to be reduced to the private sector’s pitiful levels.

The same divisive rhetoric is used to depict a supposed war for society’s scarce resources between the generations. But here again the blindingly obvious answer is not to rob granddad Peter to pay teenage Paul, setting society against itself, but to work to boost the available outputs (private enterprise) and distribute the resources created more effectively (public). It’s the supply side, stupid.

Let’s face it, if the private sector, the engine room of capitalism, is now too feeble to keep people in work, in food and shelter and in decent retirement, then either capitalism ceases to be defensible, or the engine room needs a complete and urgent overhaul.

That’s good news because despite the institutional pessimism the latter is perfectly possible – if we choose to do it. The bad news, of course, is you’d never guess it from the dominant narrative, incessantly parroted and almost never challenged by the mainstream media, which have thus, even the parts of it that think themselves ‘progressive’, become part of a de facto alliance against optimism, action and change. For journalists and everyone else alike, that is not a happy thought.

If the government was responsible for the UK’s whelkstalls, here’s what it would do. It would commission McKinsey or PWC to do an expensive study. Next, it would outsource national whelkstall management to Capita or similar, which would then subcontract whelkstall operation to regional providers, either new organisations or consortia of existing local operators cobbled together to bid.

The first result of whelkstall reform would be a cut in the revenues of local operators, which would now be supporting two extra layers of management overhead. Some localities would find themselves whelkless, since their local operator had gone bust, not been selected for one of the consortia, or refused to prepare whelks to the recipe of the hated regional rival up the road. The government would declare the reform ‘a success’, although not releasing any figures to support the claim; the outsourcer likewise, as well it might since it was making 20 per cent on its contract revenues. A whelkstall regulator would be set up to ensure targets for hygiene and quality were met and whelkstall whistleblowers protected.

An exaggeration? Only a little. It encapsulates the second reason to throw the government’s insufferable boasting about its business friendliness back in its face: without exception, every reform or ‘solution’ it has brought to an already hard-pressed public sector has not just failed to improve it: it has systematically made things worse. This holds at macro- as well as micro-organisational level, and is the opposite of surprising, since it has single-mindedly applied (already wrong) private-sector thinking to the public sector, where it comes out even wronger.

Take the NHS. Faithful to the failed, false (see last week’s article) and reductive neo-liberal conceit that the market and transactional relationships are the only efficient form of organisation, the coalition’s reforms have, as the King’s Fund confirmed in a critical recent report, substantially marketised healthcare. In so doing they have carried out a ‘distracting and damaging’ top-down reorganisation, brought in ‘complex and confusing’ mechanisms for accountability and governance, and failed to plug a lack of system leadership which is increasingly problematic when there is a need for more bottom-up adjustment to deal with the consequences of the reforms. The report could have added that relying on competition (the essence of markets) to bring about cooperation and integration is a contradiction in terms.

As this suggests, many of the NHS’s ills are iatrogenic – caused by the treatment. Thus, as always, measures designed to reduce costs (rationing of all kinds, NHS 1111…) drive up costs, while targets create unattended, unwatched spaces where scandals bubble up malignantly until they burst. Yet more intrusive and counterproductive regulation and inspection ensue, resulting in a reign of terror that blankets hospitals, schools and whole swathes of the public sector like a pall.

Fear is a mockery of intelligent management – it blocks movement and makes people institutionally stupid, looking after their own skins rather than those of others, as in the old Soviet Union. ‘Sadly,’ confirms Polly Toynbee, ‘[Robert] Francis’s 2013 report into appalling treatment at the Mid Staffordshire trust has increased the “climate of fear” he criticises’ – ‘Freedom to Speak Up’, the name of his review, thus joining a growing number of ‘reversifications’ of practical meaning that this kind of management always translates into. Recent choice examples of reversification include ‘freedom to plan old age’ (translation: no pension), ‘personal budgets’ (choice over who gives you a package that is no use to you), ‘flexible labour market’ (permatemping, zero hours), the ‘sharing economy’ (winner takes all), and Help to Work (punishment for being poor).

As for local services delivered by the public sector, whether care, training, play centres and even consultancy, welcome to the whelkstall. For a comprehensive primer on this wonderland of management nonsense, read John Seddon’s incisive The Whitehall Effect: How Whitehall Became the Enemy of Great Public Services and What We Can Do About It, reviewed here, and get angry. Meanwhile, meet Henry Stewart, founder of a successful IT training and consultancy company, Happy, that has won more training and ‘great place to work awards’ than you can count. Earlier this month Stewart posted a blog on the madness of government procurement, describing what happened when the government decided that (yes) all training for Whitehall departments would be delivered through a single central contract provided by (yes again) Capita.

Having won the tender, Happy had previously been sole provider of IT training for DWP, where it was highly rated. But under the new system, previous record, quality, price or even what the department wanted, counted for nothing – DWP could have any colour it liked so long it was Capita. At a stroke, not being a Capita partner, Happy lost 25 per cent of its revenues.

It lost again when the government instituted new ‘minimum value contracts’ for apprenticeship delivery, which disqualified small businesses from direct contracts and forced them to work through others. ‘This increased the cost and complexity, as well as resulting in major delays in payment.’

‘Government regularly trundles down the path of big centralised contracts in the belief that they will provide economies of scale, but they rarely do’, comments Stewart – in this case claims of 60 per cent savings are undercut by the Cabinet Office’s refusal to release the report on which the claim is based, despite repeated Freedom of Information requests.

Let’s leave it to Stewart to draw the conclusion.

‘I find it hard to see a government that has had such a devastating effect on my business as any friend of enterprise’, he says.

‘And I also note that while they have been keen to cut corporation tax for large companies, there has been no change at all for small business. So, Mr Cameron, please do not pretend to be on the side of small business. You may be friends with the banks, the hedge funds and the tax dodgers. But you are no friend of hard-working small enterprises like mine.’

The pro- vs anti-business spat currently being vented by politicians in Westminster and certain red-faced businessmen is as meaningless as it is dispiriting. To call opponents out as anti-business because they suggest that all is not 100 per cent for the best in the best of all possible business worlds is childish, self-demeaning and deeply insulting to the rest of us.

The fact is that a love-hate relationship with business is entirely justified. The company is one of mankind’s most prodigious inventions. Large corporations are central to our current existence. No advanced economy has been built without them; they and their supply chains have hauled billions out of poverty, and in the developed economies, life, both work and play, would be inconceivable without them. Yet as with any technology, business’s potential for harm is as great as that for wellbeing. While no organisation is responsible for so much prosperity, none, particularly since 2007, has also created more confusion and mayhem. If it is inconceivable that that many of the world’s biggest problems, from global warming to inequality, can be solved without business involvement, it is partly because of the business role in causing them.

It is difficult, then, to exaggerate business’s importance. As the FT’s chief economics writer, Martin Wolf, has put it: ‘Almost nothing in economics is more important than thinking through how companies should be managed and for what ends.’

And here’s the rub. Unfortunately, Wolf goes on, ‘we have made a mess of this. That mess has a name: it is “shareholder value maximisation”. Operating companies in line with this belief not only leads to misbehaviour but may also militates against their true social aim, which is to generate greater prosperity’.

Wolf is not alone. At the Global Peter Drucker Forum in November, Roger Martin, previously dean of Toronto’s Rotman School of Management, observed that today’s capitalism was structured to reward banditry rather than stewardship. Colin Mayer is another past business-school dean, this time of Said at Oxford. In his recent book (review here), he charges that notwithstanding their near-miraculous past achievements, companies are now endangering their creators. ‘It is not an exaggeration to say that through their negligence, incompetence, greed, or fraud, corporations are a threat to our livelihood and the world we live in’ – ‘our Frankenstein’, in fact.

I could go on. These are just three in a growing chorus of business A-listers (many others include Dominic Barton, global head of McKinsey, Paul Polman, chairman of Unilever, Jack Welch, former CEO of GE, long-time UK business observer Charles Handy) voicing alarm that business-as-usual is increasingly not the answer, as David Cameron, George Osborne and, disappointingly, even Vince Cable seem to assume, but the number one problem we need to solve. Even Ed Milliband appears to imagine that a few minor tweaks and one-off tax charges will do the trick.

But judge for yourself. The fact (yes, fact) is that shareholder capitalism, an ideological construct of the 1970s, has not delivered the goods, even for shareholders. Martin has shown that shareholders have done less well under the regime that puts them first than it did in the postwar years, when companies accepted that they had obligations to employees and society too. Since then, companies’ return on assets has fallen by 75 per cent. Corporate longevity is plunging; on both sides of the Atlantic, the number of publicly quoted companies has dropped by half in 15 years. Brutally, the PLC, the core institution of capitalism, is no longer its dynamic engine but the millstone holding it back. It may even be on the way out.

The reason? Simple: the short-termist, shareholder-dominated formula favoured by capital markets and corporate governance codes is a recipe for slow, sometimes rapid, death rather than robust health and long-term survival. Companies are escaping the constraints of that regime by going private, merging, or going bust. In this light the current bout of business Labour-bashing resembles nothing so much as the last roar of the dinosaurs as they blunder witlessly towards their own extinction.

We know what’s brought us to this pass. The most dangerous bubble of all, as Mihir Desai pointed out in an important HBR article, is the one that has attracted least attention: the giant financial incentive bubble that has been inflated with the intention of aligning the interests of corporate and fund managers with those of shareholders. As was the intention, these incentives have indeed changed behaviours, but the results are disastrous. As Desai points out, through massive misallocation of talent and resources, ‘These changed incentives and rewards have contributed significantly to the twin crises of modern American [and more generally Anglophone] capitalism: repeated governance failures, which lead many to question the stewardship abilities of American managers and investors, and rising income inequality.’

What Chicago’s clever economists failed to foresee in their free-market zeal was that shareholder primacy effectively put managers and corporations on a collision course with the rest of society. While society benefits from well-functioning markets that oblige companies to innovate to create new advantage, which is then commodified by rivals to the profit of all consumers (think of the repeated cycle of innovation in semiconductors and personal computers), under shareholder value it is in companies’ interests to strive to make markets as imperfect as possible – through cartels, oligopolies and lobbying for special privilege, for example – to protect their own rents. In a zero-sum game, the object of business strategy, as in Michael Porter’s well known model, is to prevent other stakeholders from eating the shareholders’ (including CEOs’) lunch – in other words, capturing value rather than creating it, working against the larger interests of society.

As Desai suggests, here in these distorted incentives is the cause of the financial crash in 2008; here is the explanation why companies are investing in cost-cutting measures in order to return cash to shareholders via dividends and share buybacks instead of in innovation that would create new markets, jobs and value, as in the past; here is the reason for the race to the bottom in wages and benefits and the race to the top in CEO pay; here is the reason why companies in the richest countries apparently can’t afford to pay a living wage or live up to their pension commitments.

Here too is the reason why the much vaunted internet will, under present conditions, create neither jobs nor wealth for the majority. On the contrary, as Andrew Keen and others have argued, it simply turbocharges present tendencies to a frightening degree. On the other side of the ledger, chief executives and short-term shareholders have benefited in direct proportion to the extent that they have kept wages down, exploited suppliers and externalised as much of their costs as possible (in-work benefits to subsidise low pay, bail-outs and quantitative easing for the banks, environmental clean-up) on to society as a whole. And without orchestrated political change, they will continue to do so. Of course they will; why wouldn’t they? That’s what business schools teach them, consultants recommend and corporate governance codes solemnly condone.

So now tell me why ‘thinking through how companies should be managed and for what ends’, and similar debate over organisations in the public sector, shouldn’t be at the very top of the electoral agenda – or to put it the other way around, why failing to put it there is not a dereliction of Westminster’s primary duty to its constituents. Those perverse incentives are still there. The one good thing about the unfolding scandal of HSBC and Lord Green is that it reveals in all its cynicism what for politicians being ‘business-friendly’ really means. As so often, for the larger perspective one has to come back to Peter Drucker. ‘Free enterprise,’ he wrote, ‘cannot be justified as being good for business. It can be justified only as being good for society’. If being good for society involves a little temporary unfriendliness to companies and their leaders unwittingly undermining it, so be it.

(See also ‘Being pro-market and being pro-business are two very different things’, here)