Governance

Control in a change of eras

May 13, 2015

I think it is good to realize that many principles that we now recognize as "good governance" emerged from the values ​​of the industrial revolution and no longer fit this era, writes Arco van de Ven in this column.

Image: © Nationale Beeldbank

We do not live in an era of change, but in a change of eras. Jan Rotmans, Professor of Transitions and Transition Management, convincingly describes this conviction in his book "Verandering van tijdperk - Nederland kantelt” (Change of Era - the Netherlands in Transition). A change of eras, such as the Industrial Revolution in the second half of the nineteenth century, is characterized by transitions in various fields, says Rotmans. He sees three tipping points in our society.

First, the social order will change. Society is transforming from a central, hierarchically-controlled society to a horizontal, decentralized, and bottom-up working unit. The changing economic structure is the second tipping point. Where in the past large, bureaucratic organizations were necessary to produce cheap products, in the new digital economy it is possible to develop products and services locally on a small scale, for example by using 3D printers. The change in power relations is the final tipping point. Where once political influence and economies of scale determined access to resources, access to knowledge and information is now also accessible outside of political and social institutions.

Transition period

The Netherlands is therefore, according to Rotmans, currently in a transitional period from the old order to a social order in which horizontal and decentralized contexts, such as local communities, virtual and physical networks, will be in charge. This means, he says, that representative bodies such as trade unions and environmental clubs, Roman Catholic, Protestant and liberal political parties and broadcasting corporations will gradually lose power and disappear. 

Thus states Rotmans. Time will tell whether it is a change of eras. But the trends Rotmans identifies are very recognizable. What does such a change mean for the governance and control of companies? I think it is good to realize that many principles that we now recognize as "good governance" emerged from the values ​​of the industrial revolution. When setting up companies, we are used to thinking in terms of specialization of tasks and responsibilities, standardizing activities, reward systems, representation of interest groups, and gaining control based on systems, structures, and checks. With a high degree of predictability as in the old order, these are fine mechanisms to centrally produce high quality products and services. But in the new order proposed by Rotmans, they are totally inadequate.

People centered

The new order will be people-centered. Not profitability, but quality should determine how and with whom work should be done. Being in control then does not depend so much on the presence of manuals, inspection, quality departments, detailed departmental plans and budgets, as on the presence of the preconditions to deliver high quality products and services at reasonable prices. Or, to use Rotmans’ words, the structures must again serve people. 

Prof. Dr. Arco van de Ven, CPA, Professor of Accounting Information Systems at TIAS School for Business and Society of the University of Tilburg. This column was originally published in the Dutch-language ControllersMagazine.

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