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A stakeholder/quality management approach to whole-of-enterprise

MetaManagement

management

Kevin Foley

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ISBN 0 7337 6359 6 Standards Australia All rights are reserved. No part of this work may be reproduced or copied in any form or by any means, electronic or mechanical, including photocopying, without the written permission of the publisher. Published by Standards Australia Ltd GPO Box 5420, Sydney, NSW 2001, Australia website: www.standards.com.au

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Meta Management

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Meta Management

A stakeholder/quality management approach to whole-of-enterprise management

Kevin J. Foley

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This publication is the original work of Kevin J Foley, and has been gifted by him to Standards Australia for publication. As it is not an Australian Standard, it has not been developed and approved using the full transparency and consensus process that underpins Australian Standards. However, it has been subject to a level of peer review and endorsement by Committee MB-011, Business Management Systems, of which Dr. Foley is a member. For cataloguing purposes, it has been identified as HB 265.

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We cannot get far in the study of organizations or of anything else unless we have some kind of theoretical model as a guide to perceiving what is essential in the midst of the immense mass of subordinate detail. Kenneth Ewart Boulding The Organization Revolution, [1968, p xviii]

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CONTENTS
ACKNOWLEDGEMENTS ....................................................................................................... v
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FOREWORD ....................................................................................................................... vii PREFACE ........................................................................................................................... ix PART 1 CONTEXT AND RATIONALE ................................................................................... 1 Chapter 1 Introduction ............................................................................................ 3 A Stakeholder Perspective ................................................................................ 4 A Stakeholder Model of the Business Enterprise .............................................. 6 Summary ........................................................................................................ 12 Chapter 2 Change .................................................................................................. 18 The Information Age ...................................................................................... 19 The Computer and Communication Technologies .......................................... 22 Summary ........................................................................................................ 28 PART 2 QUALITY MANAGEMENT I .................................................................................. 31 Chapter 3 Critical Appraisal .................................................................................. 33 Introduction .................................................................................................... 33 Method and Theory I ...................................................................................... 46 Summary ........................................................................................................ 61 Chapter 4 Foundation Literature............................................................................ 65 Introduction .................................................................................................... 65 The Business Enterprise.................................................................................. 70 Method and Theory II..................................................................................... 71 Implementation: batteries not supplied ........................................................ 75 Antecedents .................................................................................................... 80 Summary ........................................................................................................ 93 Chapter 5 Reviewing the Weaknesses ................................................................... 96 Introduction .................................................................................................... 96 Expressions of concern ................................................................................... 97 A Sociological Perspective ............................................................................104 Summary .......................................................................................................107

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PART 3 THE CONTEMPORARY BUSINESS ENTERPRISE ....................................................111 Chapter 6 A Stakeholder Perspective....................................................................114 Introduction ...................................................................................................114 The Business of Business ..............................................................................115 The Contemporary Business Enterprise .........................................................122
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Summary .......................................................................................................132 Chapter 7 Stakeholders.........................................................................................134 Introduction ...................................................................................................134 The Business Environment: Stakeholders and the Wider Community ............135 Stakeholders ..................................................................................................138 Summary .......................................................................................................151 Chapter 8 Stakeholder Interests ............................................................................152 Introduction ...................................................................................................152 Financial Probity ...........................................................................................153 Knowledge/Intellectual Capital......................................................................155 Owner [Shareholder] Value/Profit .................................................................157 Quality of Product/Service.............................................................................158 Ethics and Morality .......................................................................................159 Innovation .....................................................................................................160 Plans, Planning and Strategy..........................................................................161 Health and Safety ..........................................................................................163 Data Integrity/Privacy....................................................................................163 Risk ...............................................................................................................164 Summary .......................................................................................................165 Chapter 9 Stakeholder Satisfaction: The Role of Audit ........................................170 Introduction ...................................................................................................170 Audit .............................................................................................................171 The Philosophy, Theory, Axioms, and Principles of Audit ............................174 Audit and Assessment....................................................................................184 The Future of Audit .......................................................................................188 Summary .......................................................................................................195

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PART 4 QUALITY MANAGEMENT II ................................................................................197 Chapter 10 Quality Management and the Multi-Stakeholder Enterprise.....................199 Introduction ...................................................................................................199 Quality Management and Business Behaviour ...............................................200 Stakeholders and the Wider Community ........................................................202
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Wider community ..........................................................................................203 The Shareholder ............................................................................................204 Management ..................................................................................................205 The Environment ...........................................................................................205 Government ...................................................................................................206 Customers, Staff, and Suppliers .....................................................................206 Stakeholder Interests......................................................................................208 Summary .......................................................................................................209 Chapter 11 Managing by Quality: Quality Management as a Meta Theory...................211 Introduction ...................................................................................................211 A Definition ..................................................................................................212 Two Theories.................................................................................................214 Verbal Form: Or Whats in a Name? .............................................................217 Theory and Method III...................................................................................220 Concluding Remarks .....................................................................................222 PART 5 META MANAGEMENT ........................................................................................225 Chapter 12 Review and Conclusion......................................................................227 Quality Management .....................................................................................228 Meta Management .........................................................................................231 Revisiting Some Assumptions .......................................................................232 Conclusion.....................................................................................................237 POSTSCRIPT .....................................................................................................................241 BIBLIOGRAPHY ................................................................................................................243

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ACKNOWLEDGEMENTS
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Looking back at what has been an extended and deep interest in organisations, and their management, first as an undergraduate and post graduate student studying the business enterprise, then a somewhat shorter, but more intense association with quality management, and a more recent and more formal association with audit, it is interesting to realise, with the benefit of hindsight, that a common approach applied to what appeared at the time to be relatively disparate encounters. It is equally interesting, and somewhat chastening, to list those who showed a genuine and supportive interest in those various stages of what has been an enduring, fascinating and intellectually rewarding journey. The common theme has been that I have chosen, most often without aforethought, subjects that are best described as being in the intersect of well defined fields rather than at their core, or even at their margin. Moreover, within those often relatively unexplored intersects the locus of interest has been in another intersect; this time between theory and practice. A list of those who have shown an understanding of those interests and offered protracted help and guidance is, perhaps not surprisingly, very short. In relation to the issues addressed in this book that list contains just three names Don Lamberton, Keith Ketheeswaran and John Dalrymple. It was the undergraduate lectures of Don Lamberton that first exposed me to the business enterprise, or the firm as it is usually described by economists, and instilled an interest that he extended and nurtured as tutor. What was special about the Lamberton lectures and tutorials was an obvious (even to the undergraduate) deep understanding of, and passion for, the subject. Using foundation literature (rather than a textbook) to describe an unfolding (and unending) debate on the nature of the firm Professor Lamberton brought personality and life, and a sense of intellectual struggle, to an otherwise dreary subject that was then something of a backwater in undergraduate economics. Reading the works of Schumpeter on the entrepreneur, knowledge and innovation, Coase on why firms exist, Knight on risk and uncertainty, and many other seminal works (Andrews, Arrow, Chamberlin, Hicks, Penrose, Richardson, Robinson, Shackle) established an appreciation of both the complexity and the social and economic significance of the firm, and created an interest/enthusiasm that remains undiminished. Those lectures and tutorials provided a first appreciation of the importance of theory and left an enduring fascination with the history of thought. Examining the progress that has been made in our understanding of the business enterprise over the past century, it is refreshing, and comforting, to discover that not only is much of the truly fundamental work contained in the literature of economics, but also, thanks to Don Lamberton, exposure to that literature was part of my earliest university experience. It was Keith Ketheeswaran, in his role as a fellow director, and Managing Director, of Quality Assurance Services Pty. Ltd., [now SAI Global] who saw non-financial audit moving from the periphery to the centre of management attention, and realised the need to raise the ethical, education and training standards of QAS auditors to match those of financial and operational audit. Not surprisingly it was he who encouraged and supported the writing of The Quality Auditor. As readers of that book will appreciate, it was written expressly for the staff of Quality Assurance Services to provide a foundation for auditor reform in that organisation which in addition to being Australias largest Certification/Registrar was at that time also an international leader in that field. In addition to his intellectual support Keith also played a very practical role

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in the development of this work in that it was he who first proposed that I take an active role in the management and audit committees of Standards Australia, and subsequently the International Organization for Standardization [ISO]. Those activities commenced in 1996 and 1999 respectively and involved active participation in the ISO/TC 176/TC 207/JWG which produced ISO standard 19011 [Guidelines for quality and/or environmental management systems auditing] in 2002.
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Of the many hundreds with whom I became closely associated as a member of the quality movement, in Australia and internationally, during the halcyon days of quality in the late 80s and early 90s (all of whom expressed a deep, passionate and life-long interest in quality management), few remain most have left what they perceived, perhaps correctly, to be a sinking ship. Interestingly, but not too surprising, most of those early supporters moved only far enough to find another management methodology (some of which bear a striking resemblance to quality management, but have a different name) in which to express a deep passionate and lifelong interest. Of the few who have maintained an interest in quality management, only a very small number have shown a concern with the issues that have been instrumental in bringing quality management into disrepute, ie., its lack of an explicit theory and paucity of empirical support. One of that now very small, elite group of scholars is Professor John Dalrymple of the Royal Melbourne Institute of Technology. It was John who encouraged, as a positive endeavour, a critical search for the theoretical foundation and business relevance of quality management, and made it possible for me to spend six stimulating months with him at the Centre for Management Quality Research, RMIT. Meta Management is the direct result of the influence and support, both intellectual and practical, of Don Lamberton, Keith Ketheeswaran, and John Dalrymple. Don Lamberton provided the initial understanding and fascination with the firm, proposed and fostered post graduate research on the theory of the firm, and without either of us appreciating it, created the foundation and direction for almost all later research. Keith Ketheeswaran opened up new horizons, and a new platform for discussing management and audit, by involving me with the International Organization for Standardization. John Dalrymple did much the same by introducing me to a new intellectual stimulus with his invitation to join a group of international scholars that were to form the Multinational Alliance for the Advancement of Organisational Excellence [MAAOE]. Colleagues in Standards Australia, QAS/SAI Global, ISO, and MAAOE with whom I have worked and exchanged views, have each had a profound influence on my thoughts about management and audit and their relationship, and must bear some responsibility (albeit anonymously) for the contents of this book. They must also accept my grateful thanks. All of which illustrates the extent to which the academic scribbler John Maynard Keynes was correct when he suggested, in the last paragraph of his frame-breaking, The General Theory of Employment, Interest and Money, that we are all, whether or not we are aware of it, for the most part working out the ideas and dreams of others.

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FOREWORD
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This remarkable book is the culmination of a lifetime of questioning, study, analysis, thinking and original synthesis by one of Australias most prominent and respected management academics, Dr Kevin Foley. It is both a milestone and a stepping-stone in the never-ending journey to a better, more complete understanding the theory and practice of management. Even more admirably, it is a work of rare erudition and scholarship; and while it will immediately become a standard reference work wherever management is studied, it is also a book that will provide the interested lay reader with a cornucopia of pleasure. Its breadth, its insights, its thought-provoking questions and conclusions will give pleasure to any reader with a professional interest in the way management systems operate at all levels and in all environments. It is also the fulfilment of a dream that Dr Foley and Standards Australia have shared for many years the assembly of a body of academic literature that addresses the fundamental theory of quality and management. So it is with both pride and satisfaction that, on behalf of Standards Australia, I am privileged to write this brief foreword. Dr Foleys association with Standards Australia goes back to 1987, when he was appointed by the Australian Government to chair a Committee of Review into the operation of Standards, Accreditation and Quality Control and Assurance within the Australian economy. This landmark report still valuable reading to this day was the key foundation to the transformation of Australias technical infrastructure, with its new focus on quality, productivity and competitiveness. Prior to the Foley Report, the Standards Association of Australia, as it then was, had, by most accounts, stumbled badly. It was in the doldrums, and in a financially fragile state. The Foley Report, and its recommendation, were the catalyst for a metamorphosis in the business. It became Standards Australia; it brought in a new and dynamic management; it introduced financial discipline; and it encouraged market and business development. Within five years, it had become, relative to GDP, the most successful national standards body in the developed world. Ironically, the subsequent 1995 Kean enquiry into Australias technical infrastructure that revisited the ground Dr Foley had explored less than 8 years previously, was largely predicated on the consequences of the outstanding success of Standards Australia following on from the Foley reforms of 1988. Dr Foley was invited to join the Board of Standards Australia in 1989, and subsequently served with great distinction and involvement. His passionate interest in management systems meant he was the ideal intellectual driver for Standards Australias development of a successful product and system certification business, Quality Assurances Services, now SAI Global Ltd, and which has now grown into a significant international assurance services business. During the preparation of his 1987 Report, Dr Foley realized that there was something unsatisfactory, something missing, a fundamental flaw in the description of quality management being offered in the principal writings and presentations. It was the beginning of a search, a journey that has lasted many years, and which, in this book, has reached its intellectual consummation.

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In this journey, Dr Foley has had the wholehearted support and encouragement of both the QAS and Standards Australia Boards. His first publication was The Quality Auditor, written specifically to ensure that QAS provided the highest quality of both practical and participative audit. While achieving this objective, the book did far more than that. It provided a unique analysis of, and underpinning for, the scholarly understanding of audit principles. More importantly for us, Dr Foley realized it posed more questions than it answered. The search for an intellectually sustainable theory of quality became his passion. In his next book Five Essays in honour of Homer M Sarasohn, Dr Foley presented a masterly analysis of the key features in this search for an intellectually satisfying understanding of quality management. Rich though it was, however, it merely whetted the appetite for the feast to come. That feast has now arrived in this truly original and groundbreaking work of high scholarship, Meta Management. It is a book that will form an indispensable part of any future study of management theory and practice. Meta Management is proudly published by my organization, Standards Australia, as a tribute to Kevin Foleys contribution to the organization, to Australian society, to the world of academia, and to the elevation of quality management into a rigorous and intellectual discipline. All of us who have known Kevin Foley personally have learned a great deal from him. His exhaustively broad and deep research and reflections on the subject of quality management is at once humbling and inspiring. In the tradition of all great thinkers, his mind and his vision have encouraged the rest of us to think more clearly and to see further. John Castles AM Chairman Standards Australia February 2005

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PREFACE
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Todays manager faces accelerating, and often quantum, change, increased complexity, volatility and ambiguity. A necessary response to that situation is to seek help from fellow practitioners, professional organisations, management thinkers and consultants. While there is no shortage of those offering help/solutions, the information provided is often either so simplistic to be accepted only by the desperate and gullible, or so confused to be difficult, if not impossible, to implement. Furthermore, most of that advice is concentrated on how to manage parts of an organisation, rather than its whole eg. the quality management (sub) system, or the environmental management (sub) system. That most unsatisfactory situation is exacerbated by management aids that are essentially the same, being promoted as different, new and best, and parts of an approach being presented as the whole sometimes parts are even offered as an alternative to the whole, eg., quality assurance as an alternative to quality management/TQM, [Conti, 1999].1 The roots of Meta Management: A stakeholder/quality management approach to whole-ofenterprise management lie in the authors long held concern with management advice that lacks strategic context, has no theoretical support, has inadequate empirical corroboration, uses concepts that are not operational, and promises more than it can deliver.2 At the centre of that concern is quality management which can be criticised on each of those counts. From its highpoint in the late 80s and early 90s, when it was promoted as a panacea, and the principal reason for Japans post war industrial renaissance, quality management has become prey to the charlatan, and today languishes in an alphabet soup of management aids (TQM, JIT, BPR, ZBB, OD, MBO, etc.) as another fad. The stimulus for revisiting, and augmenting, previous research on the business enterprise, audit, and quality management to describe a whole-of-enterprise management model, was a recent reinvolvement with the International Organization for Standardization (ISO) as a member of the
1

The problems associated with the consideration of only bits and pieces of a complex issue have been described most tellingly by Joseph Schumpeter [1943, p.82] when commenting on the way economists had described economic development: Both economists and popular writers have once more run away with some fragments of reality they happened to grasp. These fragments themselves were mostly seen correctly. Their formal properties were mostly developed correctly. But no conclusion about capitalist reality as a whole follows from such fragmentary analyses. If we draw them nevertheless, we can be right only by accident. That has been done. And the lucky accident did not happen. The parallels between the economists of the period to which Schumpeter was referring, and many purveyors of management advice are too obvious to require further comment. For a more recent discussion of this issue see Singhal and Hendricks, [1999].

Meta management has been chosen to describe the process of managing the whole enterprise because meta conveys a totality beyond holistic or integrated, and avoids the baggage that now surrounds strategic. Strategic management was the preferred title because the central focus of the model is on the organisations strategic imperatives. As the sub-title conveys, what has been called Meta Management could perhaps just as well be described as Managing by Quality (after Juran, 1951, and Kume, 1995) or Customer Driven Excellence after the Baldrige model; if excellence is taken to mean satisfaction of the needs and expectations of all stakeholders, and driven does not imply that customer satisfaction is an end rather than a means. As we mention later Meta Management is customer focused rather than customer driven ISO 9004:2000, uses both customer oriented and customer focus.

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Australian Delegation to Technical Committee 176 the committee that produced ISO 9000. At the TC/176 meeting in Bucharest in October 2003 there were discussions on integrated management, sustainability, governance, corporate social responsibility, risk management, the Excellence models of management (particularly the Baldrige and EFQM models), and ISO 9004:2000 [Quality management systems Guidelines for performance improvements]. What was most striking, and somewhat disconcerting, about those discussions was an apparent acceptance that those issues were essentially independent, or sufficiently so for interdependencies to be ignored. Those discussions highlighted the difficulties that can arise when such complex (and interdependent) issues are discussed without the benefit of a mutually agreed generic model, or overview (strategic context) of the contemporary business enterprise a model that identifies what Kenneth Boulding [1968] referred to as the essential features of the business enterprise (including its aim), shows, in broadest terms, how those features (multiple stakeholders, competing and changing stakeholder interests, risk, processes etc.) are related, and provides a theory to assist understanding and guide the management of this extraordinarily complex social entity, that has become the primary engine of economic enterprise in the world.3 Of course those remarks are not intended to suggest that the need for such a model of the business enterprise is not shared by others. Nor are they to suggest that attempts have not been made to build that model, or that there is not already a considerable literature on the business aim, business processes, governance, risk management, etc., [Tsoukas, 1994; Willmott, 1996]. On the contrary, management thinkers and managers have long sought the Holy Grail of a model that identifies the essential features of organisations and provides a whole-of-enterprise management theory. Moreover, several of the issues referred to have been extensively addressed, and some have been at the centre of management discourse for centuries. It is to say, however, that discussion of those issues rarely occur in the context of a framework, or architecture that, a) identifies the aim of business and describes the boundaries of business activity enterprise and industry boundaries are becoming increasingly soft, porous and ambiguous as more stakeholders emerge, managers and staff become major shareholders, and more business activity is based on intellectual rather than physical capital, b) provides a theory

Discussing the growth and increasing importance of the business enterprise, Orts [1998, p.1952] observed that: By 1990, business corporations accounted for more than ninety percent of total sales and receipts in the United States, and the 7000 largest corporations, with assets of $250 million or more, accounted for more than half of all sales and receipts. The corporate form also became dominant abroad. The largest business firms in most countries are corporations. In the late twentieth century, the exponential growth of multinational or transnational corporate enterprise qualifies as one of the most important historical developments. From 1969 to 1990, the number of multinationals tripled from around 7000 to almost 24,000. These multinational companies are often structured as parent-subsidiary groups. By 1994, there were approximately 37,000 multinational parents, which accounted for more than 200,000 foreign affiliates or subsidiaries. The largest 300 multinational corporations account for about one quarter of the worlds total productive assets. Half of all parents of multinational groups are incorporated in one of four countries: the United States, Great Britain, Germany, or Japan. A second macroanalytic trend in the organisation of corporate enterprise is the increasing concentration of share ownership in institutional investors. These institutions include public and private pension funds, mutual investment funds, insurance companies and banks. Collectively, they hold more than half the stock of public corporations in the United States, and even greater percentages of some of the largest corporations. The data indicate a sea change in the last half of the century. In 1950, institutions held only 8% of the total equity of corporations in the United States. The percentage increased to 33% in 1980, 45% in 1988, and 53% in 1990. In other countries, notably Great Britain, institutional holdings are even larger.

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to explain business behaviour, and c) offers a theory of management that binds, and gives relevance to, those features perceived as essential (in the midst of the immense mass of subordinate detail) to understanding and managing the profoundly important, extraordinarily complex, dynamic, and ever-mutating, business enterprise.4 Developed with those considerations in mind, and using the Baldrige and EFQM Excellence models and ISO 9004:2000 as a frame of reference, Meta Management is offered as a next step in the never-ending pursuit of models that provide a better understanding, and a better way of managing the business enterprise.5 Notwithstanding that aim, it must be emphasised, at this earliest point, that Meta Management is not ready for use it is very much a work in progress and its first use must be as a guide for further research rather than application. Although a thorough search of the management literature will yield much of the information necessary to support its assumptions, considerable new research will need to be done before Meta Management could be put forward, with confidence, as an aid to managing the contemporary business enterprise. The EFQM and Baldrige Excellence models play an important role in the development of Meta Management, because they are formally described, widely used, and well-developed aids to understanding and managing all, or part, of the business enterprise many hundreds of similar models are also used throughout the world.6 Those models have been developed by prominent and highly regarded national organisations, they are strategic in their intent, and are expressed in language closely related to the day-to-day language of business. ISO 9004:2000 also carries the imprimatur of a respected (international) organisation, is in use throughout the world7, and is supported by a variety of standards, and guides, that deal with associated issues such as audit and measurement. ISO 9004:2000 is linked to a widely used standard (ISO 9001:2000) that deals specifically with one stakeholder (the customer) and the sub-system of management/

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As Metzger and Dalton [1996, p.490] have put it: Whatever organisations may be, they are not people. Neither are they machines, though at times they may exhibit attributes that we properly associate with persons and machines. Those who have thought of them as such, like the proverbial blind man grasping the pachyderm, have hold of parts of the corporate beast but have an incomplete sense of the animal in its entirety. Daniel Dennett has noted that metaphors are tools of thought, making it imperative that we equip ourselves with the best tools available. Those who would understand and change corporate behaviour must use all of the tools available to them. Charles Handy [1995, p.70] has described the business enterprise as existential, ie, its principal purpose is to fulfil itself, to grow and to develop to the best that it can be, given always that every other corporation is free to do the same. It owes something to each of the ring holders, but it is owned by no one.

Selection of only two of the very many Excellence models that now exist throughout the world should not be taken to suggest that The Baldrige and EFQM models are considered to be the best. Those models have been selected because the are outstanding examples, readily available, and widely used beyond the national boundaries for which they were specifically developed. Other models, such as the Australian Business Excellence Framework and the Deming Prize, are also referenced where appropriate. For a discussion on how Business Excellence Models are used within organisations, see Leonard and McAdam [2002]. Though very similar to other Excellence models in its content and purpose the Baldrige model differs from other models in that it was created by an Act of the US Congress. Named after a former US Secretary of Commerce, the Malcolm Baldrige National Quality Improvement Act of 1987, Public Law 100-107, was signed by President Reagan on August 20, 1987. Since that time, more than two million copies of the Baldrige criteria have been printed and distributed. If sales of this standard is any guide to its use ISO 9004:2000 is far less widely used than the Excellence models. For an analysis of the application of ISO 9004:2000 in Canada see Anne Wilcox, et al., 2004, Towards Business Excellence: The Case of ISO 9004:2000 in Canada, Proceedings of the 9th ICIT, Bangkok, April, 2004.

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strategic process (quality) that addresses the needs and expectations of that stakeholder.8 Importantly, ISO 9004:2000 is to undergo revision, and therefore provides a ready opportunity for presenting the ideas contained in Meta Management. Notwithstanding their positive characteristics, the ISO 9004:2000, Baldrige, and EFQM models have features that restrict their usefulness, and preclude their description as whole-of-enterprise models of management. For example:
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Neither the Excellence models, nor ISO 9004:2000 have an explicit theory nor are they well supported by independent empirical research. Much of the empirical support for these models is conducted by, or on behalf of, the organisations developing them. Furthermore, as Flynn and Saladin, [2001, pp. 618-619] have observed:
Although the Baldrige criteria and framework are widely accepted in practice, there is surprisingly little theoretical and empirical evidence of their validity...because the Baldrige model has not been empirically validated, its use as a surrogate for the quality management construct is questionable.

Also addressing the Baldrige model, Dean and Tomovic [2004, pp.41-48] have criticised the lack of research into the relationships among items in the Baldrige criteria and their overall relationship to organisational effectiveness.9 The need for empirical research that is, and can be seen to be, independent, does not rely only on the practical view that such information will improve the appeal and usefulness of ISO 9004:2000 and the Excellence models to business. It also relies on the general principle that the practices, procedures and techniques, of all endeavours, should be continually tested both in practice and against their supporting theory. Without explicit identification of their theoretical foundation, the Excellence models and ISO 9004:2000 are unable to satisfy that condition, and the users of those models are denied the facility to reach back to fundamentals to address issues not previously encountered. As we mention later, the importance of theory has been markedly increased by developments in the computer and communication technologies. One of the more profound outcomes of those technologies is that staff, at all levels, and senior management in particular, spend an ever-increasing part of their time and energy addressing issues that are nonroutine or one-of-a-kind problems whose solution relies on an ability of decisionmakers to reach back to the roots of their conceptual system and its theories, and perhaps develop an entirely new paradigm in which current practice or past experience are no longer a useful decision guide . The Excellence models use evaluation weighting schemes that are arbitrary, ie., not determined by the model or empirical research. The principal concern with the weighting schemes of the Excellence models is not that the weights are arbitrarily arrived at, or that the weights differ between models, but rather that they
8

Conceptually, ISO 9004:2000 could equally well deal with all management sub-systems that address the needs and expectations of other interested parties that management identifies as able to inflict unacceptable damage and/or threaten enterprise viability and are therefore considered to be stakeholders, e.g. the environment, staff, suppliers. ISO 9004:2000 [1. Scope and 4.2 Documentation] references those other stakeholders, which are referred to as interested parties, and while purporting to address the satisfaction of their needs and expectations, is silent on how that is achieved. In his Quality Progress June 2004 reply to this appeal for further research the Director of the Baldrige National Quality Program, Harry Hertz, agrees with the need for such work and offers a number reasons why the research has not been done.

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are used at all. Of course some Excellence models do not use weights a situation that must perplex the user. In an environment dominated by uncertainty, turbulence, and ambiguity, and where the only apparent constant is change, the use of constant values is, at best, anomalous. A significant feature of Meta Management is its demonstration of the futility of schemes that weight principles, strategies or parts of strategies. Which is not to suggest that business does not place weights on the various elements of their decisions, or that leadership does not have a value. It is to say, however, that those weights/values are in flux.10 The role of ISO 9004:2000 is unclear. ISO 9004:2000 promises assistance with whole-of-enterprise management (satisfaction of interested parties) but is silent on how that is done when resources are limited and the needs of customers may conflict with those of other interested parties. The standard refers to risk management as a management system (it is a sub-system), presumably similar or identical to management systems that deal with occupational health and safety, the environment, and quality management. However, the standard offers no evidence to support that suggestion.11 Similarly the standard is said to enable an organisation ...to align or integrate its own quality management system with related management systems, but does not show how that is achieved. In the description of its scope, ISO 9004:2000 is compared to ISO 9001:2000 by stating that it [9004] ...provides guidelines beyond the requirements given in ISO 9001 in order to consider both the effectiveness and efficiency of a quality management system, and consequently the potential for improvement of the performance of an organisation but ISO 9001 also considers both efficiency and effectiveness of a quality management system. ISO 9004:2000 is confused and confusing, it reflects the hurried circumstances of its writing, and falls short of being consistent with ISO 9001:2000, of providing a context for considering how quality and other management sub-systems act to achieve business success, and of describing a whole-of-enterprise management model. The interested parties, stakeholders and key stakeholders that provide context and focus for ISO 9004:2000 and the Baldrige model are not sufficiently well defined to guide management action.12 For many organisations, interested/affected parties number in the hundreds of thousands, even millions, and the business enterprise is not able to identify more than a small fraction of that number. While the notion of interested/affected parties makes an important contribution to understanding the context of business activity it is too nebulous to inform or guide management action a situation that is exacerbated by the use of subsets of the universe of interested/ affected parties (eg., key stakeholders, key communities), without identification of their differences, and the criteria used to make their selection. To be operationally useful those models must show how business can identify the few to be addressed from the myriad of issues or interested/affected parties that constitute its environment.
10

Eskildsen, et al., [2001, pp. 185-186] have observed that: Very little research has been done on the [EFQM] weight structure and this is problematic in relation to the use of the model since it raises the question whether or not it makes sense to compare companies according to an arbitrary weight structure, which has never been empirically tested.[emphasis added]

11

Risk and uncertainty are very different, though related, concepts, that are often confused and used interchangeably. Risk refers to a situation where the outcome is not certain, but where the probability of each outcome is known, or can be estimated. Uncertainty refers to a situation where each of these probabilities is unknown. The stakeholders (but not the key stakeholders and key communities) of the Baldrige model and the interested parties of ISO 9004:2000 are essentially the same.

12

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Society, or the wider community, is not a stakeholder, as that term is used here, but rather a description of the universe of interested/affected parties that defines the context of business. The wider community describes/represents a myriad of developed, developing, waning and ever changing values (including those described under the rubrics of morals and ethics) of those who comprise the socio-political business environment an environment/constituency that now has a global dimension for very many businesses. Some of those values, and the technologies that develop and reflect them, will be impacted directly (positively and negatively and range from minor to significant) by the activities of business, while others will be influenced indirectly as a result of the very existence of the business enterprise as one of the most pervasive and dominant entities in contemporary society. In some situations, concerns about those impacts may become sufficiently widespread, and articulated in such a way, that existing stakeholders are persuaded to use their instruments to influence business, eg., customers boycotting a product because a business has been shown to use child labour. In other situations those impacts create concerns of such strength and distinction that they generate their own instruments of direct influence. In that situation, those concerns enter the objective function of business, not as an interest of an existing stakeholder (as in the example of child labour and customers) but as a stakeholder the environment can be seen as having followed such a path. Most often, however, the impact of business on community values will not be acted upon by business, either because those impacts are not appropriately described and/or those impacted do not have the means of taking effective action. In that case, those who express concern about a business impact are, in the terminology used here, an interested/affected party (albeit one that may have a high public profile, and the affected social value might be widely discussed), and will remain such, until the concern is either taken up by an existing stakeholder, or it acquires the force and mechanisms necessary to influence business directly. The wider community is not a stakeholder; nor is it an issue, or set of issues, for which it is possible to identify either a) the instruments (other than government and other stakeholders in which case the issue becomes a stakeholder interest of an existing stakeholder) for making management aware of its concerns/needs, or b) the means by which it could directly affect enterprise viability should management not respond to its concerns/needs/demands. Described as the universe of parties impacted by, or interested in, the business enterprise, the wider community is too vast in its compass and too general in its expression to serve as other than a description of the environment in which business must search for guidance on the actions necessary to achieve the business aim.13

13

Those comments on the wider community could give the impression that interests/concerns not identified with a stakeholder are unimportant. On the contrary, some of those matters may be determinants of the quality of life and of the sustainable continuance of life itself. What is being identified here is that at a certain point of time that importance is either not able to be conveyed to an existing stakeholder or directly to business, and/or the means for retaliatory action are not available. As we discuss later, the existence of such impacts by business on society place a responsibility on government to write legislation, or provide assistance to affected entities to better convey their views to business and/or facilitate retaliation. Those impacts also place a responsibility on those who promote corporate social responsibility to be specific about those concerns that business should respond to but presently does not. To argue, as many do, that all negative impacts must be responded to, is as silly as it is impossible. Identification of the wider community as a crucible of social values, highlights the importance to sustainable social development of those goods and resources that lie beyond the immediate remit of the market; items which are not directly incorporated within the pricing system which is the hallmark of a marketed good, yet on whose correct valuation and management the market depends non-market goods such as those provided by the environment or by public expenditure. This broad category includes a diversity of goods that range from open-access wilderness area recreation to health and safety improvements, and across resources as different as ozone layer and clean water. These are the goods and resources that determine so much of the quality of life, and upon which the sustainable continuance not only of the market system but life itself depends.

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The prescription of continual improvement in each of the models is neither practical nor desirable. Unless continual improvement is taken to mean that organisations should continually assess their processes and activities to identify improvements, and to effect only those improvements that are identified as adding value to the organisation, the prescription to continually improve is especially bad advice. To continually improve processes or activities (if indeed that were possible) whether they add value to the organisation or not (adding value to a particular stakeholder does not necessarily add value to the organisation) is an act of folly and a recipe for failure, not success.14 Arguments that the customer is more demanding of attention than other stakeholders have intuitive appeal, but they ignore the reductio ad absurdum nature of unqualified continual improvement, and the fact that the law of diminishing returns applies to resources expended on customer satisfaction. The notion of expending resources on the customer, or any other activity, in the blind faith that it is the most effective use of those resources has taken on the mantra of a truism in the quality management literature. In that context, Rust [1985, p.58] has pointed out that there is sufficient evidence to show that concentration on the needs of the customer can inhibit the development of new products and services (innovation) not yet conceived by the customer, yet when produced cause existing products and services to become redundant:
...the quality revolution is not without its casualties...And firms that have been lauded for their quality orientation have run into financial difficulties, in part because they spend too lavishly on customer service. For example, the Wallace company won the Malcolm Baldrige National Quality Award in 1990. However, the high levels of spending on quality that enabled them to win the Baldrige also produced unsustainable losses, and within two years they were bankrupt (Hill 1993). Similarly, Florida Power and Light spent millions to compete for Japans prestigious Deming Prize (Wiesendanger 1993). Inattention to rising costs caused a backlash by ratepayers, resulting in its quality programme being dismantled (Training 1991). From the experiences of these companies, and common sense, it is clear that there are diminishing returns to expenditures on quality. Improving quality helps up to a point, but past that point further expenditures on quality are unprofitable. Of course, many quality improvements result in a reduction in costs that more than makes up the quality expenditures (Bohan and Horney, 1991; Carr 1992; Crosby 1979; Deming 1986). However, such improvements are more prevalent in manufacturing and the more standardised services (eg, fast-food restaurants) than they are in the highly customised, big-ticket services that constitute the growth industries of the information age (e.g., electronic information services) (Fornell, Huff and Anderson 1994). This is because customization inhibits economies of scale and thus makes individual improvements less cost-effective (Anderson, Fornell and Rust 1994).

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Campbell [1996, p.706] is less subtle in his warning to those who do not see the customer as one of a number of stakeholders, all of whom must be satisfied if an enterprise is to succeed.
The past 25 years have seen a swing of the pendulum to surplus capacity. Customers have unrivalled choice; suppliers must be competitive to survive. However, as ...was explained in ISO 9004-1: 1994, satisfying customers must be balanced by operational efficiency to ensure that competitive prices and delivery of the goods or services can support the continuing existence of the business. Delighting customers is a popular phrase but has a hollow ring if the company bankrupts itself in the process. [emphasis added]
14

It is of interest to note that although the term continual improvement is used on several occasions in the Australian Business Excellence Framework, and is listed as number six of twelve Principles of Business Excellence, the notion is not referred to in the Glossary of Terms, and the text relating to that principle does not mention continual improvement, but rather refers to continual learning.

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The Excellence models are essentially competitor, rather than stakeholder, focused. The competitor perspective, or the identification of competitors as the primary focus of business activity, does not offer the same insights and understanding, and have the same relevance for the contemporary multi-stakeholder business enterprise, as the stakeholder perspective. The stakeholder perspective promotes/demands of business a positive attitude, ie., the business psychology can be described as satisfying, rather than the negative, denying/thwarting/blocking, which is the psychology of a business that looks out from its aim and sees not stakeholders but competitors. In addition to engendering a negative psychology, and obscuring stakeholders (and their dynamic relationship), the competitor perspective suffers the difficulty that the traditional notion of competition has, in many cases, given way to cooperation and collaboration.15 Baldrige, [2004, pp.2, 3, and 12] refers to the marketplace, competitive challenges and competitive environment respectively. The Australian Business Excellence Framework, while capturing the essence of the stakeholder approach in its Management Principle 11 (sustainability is determined by an organisations ability to create and deliver value for all stakeholders), also refers to Leadership driving an organisation by using a focus on Customers and Markets. Despite having the same purpose (an aid to understanding and managing the business enterprise), utilising the same management methodology (quality management) and addressing the same audience (top management) as the Excellence models and ISO 9004:2000, Meta Management differs from those models in a number of significant respects. Those differences include: An unambiguous focus on stakeholders those entities identified by business as able to impose unacceptable costs, and/or threaten enterprise viability, if their needs and expectations are not met. That operational definition identifies the wider community as the universe of interested/affected parties from which stakeholders are drawn, ie., the wider community is not a stakeholder as it is most often described. Recognition that the relationship between business and its stakeholders is a coalition of interests, and extends beyond exchanging information and having a debate where all parties are listened to. The relationship is one of communicative action, ie., the plans of action of business and stakeholders are coordinated through the exchange of communicative acts oriented toward reaching understanding. An explicit description of the business enterprise that identifies its raison dtre and aim, and draws a distinction between the business aim and the strategies used to achieve that aim. An explicit theory of business behaviour, derived from the multi-stakeholder business enterprise. An explicit theory of management, derived from the theory of business behaviour.

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15

While the stakeholder perspective has the advantage of focusing on a number of issues that are either obscured or ignored by other perspectives, it does have the disadvantage of obscuring the importance and pervasive nature of technology. Technology is one of the defining features of contemporary industrialised society, and in all its forms is an integral element of business activity and the business environment. Fox [1974, p. 1] has distinguished between material technology (equipment that can be seen and touched) and social technology that orders behaviour and relationships of people. In the whole-of-enterprise management model being developed here, technology takes its place as a defining characteristic of business and the business environment, and as the means by which business both identifies and responds to its evironment. Technology is not a stakeholder, and therefore does not define a strategic imperative for business; it is a means adopted by business to meet its strategic imperatives.

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HB 265-2005, Meta Management A stakeholder/quality management approach to whole-of-enterprise management

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