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MetaManagement

A stakeholder/quality

management approach

to whole-of-enterprise

management

Kevin Foley



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



Meta Management



Meta Management

A stakeholder/quality management

approach to

whole-of-enterprise management

Kevin J. Foley



This publication is the original work of Kevin J Foley, and has been gifted by him toStandards Australia for publication. As it is not an Australian Standard, it has not been

developed and approved using the full transparency and consensus process thatunderpins Australian Standards. However, it has been subject to a level of peer review

and endorsement by Committee MB-011, Business Management Systems, of whichDr. Foley is a member. For cataloguing purposes, it has been identified as HB 265.



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 ....................................................................................................... vFOREWORD....................................................................................................................... viiPREFACE ........................................................................................................................... ixPART 1 CONTEXT AND RATIONALE ................................................................................... 1

Chapter 1 Introduction ............................................................................................ 3A Stakeholder Perspective ................................................................................ 4A Stakeholder Model of the Business Enterprise .............................................. 6Summary ........................................................................................................ 12

Chapter 2 Change.................................................................................................. 18The Information Age ...................................................................................... 19The Computer and Communication Technologies .......................................... 22Summary ........................................................................................................ 28

PART 2 QUALITY MANAGEMENT I .................................................................................. 31Chapter 3 Critical Appraisal .................................................................................. 33

Introduction.................................................................................................... 33Method and Theory I ...................................................................................... 46Summary ........................................................................................................ 61

Chapter 4 Foundation Literature............................................................................ 65Introduction.................................................................................................... 65The Business Enterprise.................................................................................. 70Method and Theory II ..................................................................................... 71Implementation: batteries not supplied........................................................ 75Antecedents .................................................................................................... 80Summary ........................................................................................................ 93

Chapter 5 Reviewing the Weaknesses ................................................................... 96Introduction.................................................................................................... 96Expressions of concern ................................................................................... 97A Sociological Perspective ............................................................................104Summary .......................................................................................................107


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PART 3 THE CONTEMPORARY BUSINESS ENTERPRISE ....................................................111Chapter 6 A Stakeholder Perspective....................................................................114

Introduction...................................................................................................114The Business of Business ..............................................................................115The Contemporary Business Enterprise .........................................................122Summary .......................................................................................................132

Chapter 7 Stakeholders.........................................................................................134Introduction...................................................................................................134The Business Environment: Stakeholders and the Wider Community ............135Stakeholders ..................................................................................................138Summary .......................................................................................................151

Chapter 8 Stakeholder Interests ............................................................................152Introduction...................................................................................................152Financial Probity ...........................................................................................153Knowledge/Intellectual Capital......................................................................155Owner [Shareholder] Value/Profit .................................................................157Quality of Product/Service.............................................................................158Ethics and Morality .......................................................................................159Innovation .....................................................................................................160Plans, Planning and Strategy..........................................................................161Health and Safety ..........................................................................................163Data Integrity/Privacy....................................................................................163Risk ...............................................................................................................164Summary .......................................................................................................165

Chapter 9 Stakeholder Satisfaction: The Role of Audit ........................................170Introduction...................................................................................................170Audit .............................................................................................................171The Philosophy, Theory, Axioms, and Principles of Audit ............................174Audit and Assessment....................................................................................184The Future of Audit .......................................................................................188Summary .......................................................................................................195



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PART 4 QUALITY MANAGEMENT II................................................................................197Chapter 10 Quality Management and the Multi-Stakeholder Enterprise.....................199

Introduction...................................................................................................199Quality Management and Business Behaviour ...............................................200Stakeholders and the Wider Community ........................................................202Wider community ..........................................................................................203The Shareholder ............................................................................................204Management ..................................................................................................205The Environment ...........................................................................................205Government...................................................................................................206Customers, Staff, and Suppliers .....................................................................206Stakeholder Interests......................................................................................208Summary .......................................................................................................209

Chapter 11 Managing by Quality: Quality Management as aMeta Theory...................211Introduction...................................................................................................211A Definition ..................................................................................................212Two Theories.................................................................................................214Verbal Form: Or Whats in a Name? .............................................................217Theory and Method III...................................................................................220Concluding Remarks .....................................................................................222

PART 5 METAMANAGEMENT ........................................................................................225Chapter 12 Review and Conclusion......................................................................227

Quality Management .....................................................................................228Meta Management .........................................................................................231Revisiting Some Assumptions .......................................................................232Conclusion.....................................................................................................237

POSTSCRIPT .....................................................................................................................241BIBLIOGRAPHY................................................................................................................243



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ACKNOWLEDGEMENTS

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 anotherintersect; 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 ofeconomics, 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.

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 life-

long 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 empiricalsupport. 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 newhorizons, 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, TheGeneral 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

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 foran 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 AustraliaFebruary 2005



Meta Management

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PREFACE

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 ofMeta Management: A stakeholder/quality management approach to whole-of-

enterprise managementlie 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 re-

involvement 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 developedcorrectly. 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].2 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 calledMeta 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 ofallstakeholders, and driven

does not imply that customer satisfaction is an end rather than a means. As we mention later Meta Management is

customerfocusedrather 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 apparentacceptance 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

3 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 countriesare 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, MetaManagement is offered as a next stepin 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 ofMetaManagement, 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 world 7, 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/

4 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.5 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 theAustralian Business Excellence Frameworkand theDeming Prize,

are also referenced where appropriate.

For a discussion on how Business Excellence Models are used within organisations, see Leonard and McAdam [2002].6 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.

7 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 inMeta 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:

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, theorganisations 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 issurprisingly 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 onlyon 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 inpractice 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 inparticular, spend an ever-increasing part of their time and energy addressing issues that are non-

routine 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 allmanagement 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.9 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 ofMeta 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 avalue. 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 qualitymanagement 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 thosemodels 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.12 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.



Meta Management

xiv

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 whocomprise 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 becomesufficiently 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 ofdirectinfluence. 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 theenvironment 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 (albeitone that may have a high public profile, and the

affected social value might be widely discussed), and will remain such, until the concern iseither 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 inwhich 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 actionsnecessary 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.



Meta Management

xv

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 werepossible) 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 thecustomer 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 theirquality orientation have run into financial difficulties, in part because they spend too lavishly oncustomer 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 alsoproduced 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 itsquality programme being dismantled (Training 1991).

From the experiences of these companies, and common sense, it is clear that there arediminishing returns to expenditures on quality. Improving quality helps up to a point, but past thatpoint further expenditures on quality are unprofitable. Of course, many quality improvementsresult in a reduction in costs that more than makes up the quality expenditures (Bohan andHorney, 1991; Carr 1992; Crosby 1979; Deming 1986). However, such improvements are moreprevalent in manufacturing and the more standardised services (eg, fast-food restaurants) thanthey are in the highly customised, big-ticket services that constitute the growth industries of theinformation age (e.g., electronic information services) (Fornell, Huff and Anderson 1994). This isbecause customization inhibits economies of scale and thus makes individual improvements lesscost-effective (Anderson, Fornell and Rust 1994).

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 haveunrivalled choice; suppliers must be competitive to survive. However, as ...was explained inISO 9004-1: 1994, satisfying customers must be balanced by operational efficiency to ensurethat competitive prices and delivery of the goods or services can support the continuingexistence of the business. Delighting customers is a popular phrase but has a hollow ring if thecompany 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.



Meta Management

xvi

The Excellence models are essentially competitor, rather than stakeholder, focused.

The competitor perspective, or the identification of competitors as theprimary focus of businessactivity, does not offer the same insights and understanding, and have the same relevancefor 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 andcompetitive 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 allstakeholders), 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 businessenterprise), 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 toimpose unacceptable costs, and/or threaten enterprise viability, if their needs and

expectations are not met. That operationaldefinition identifies the wider community as theuniverse of interested/affected parties from which stakeholders are drawn, ie., the wider

community is nota stakeholder as it is most often described.

Recognition that the relationship between business and its stakeholders is a coalition ofinterests, 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 thataim.

An explicit theory of business behaviour, derived from the multi-stakeholder business

enterprise.

An explicit theory of management, derivedfrom the theory of business behaviour.

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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