Companies have generated unprecedented wealth, acquired state of the art skills and sophisticated management models which have largely, if not exclusively, monopolized the pool of available talents. The public sector, to the contrary, has remained at the margins of globalization.
The Influence, Relevance and Growth Index (IRG TM) is composed of 10 quantitative parameters (refer to the “In Practice” section). It measures the influence of a Corporation in such a structurally changed societal context, its relevance and capability to become a positive contributor to policy making to stimulate economic growth.
Globalization and its impact on Companies
- Vision: regional and/or global with enhanced understanding of complexities
- HR: talent acquisition, value proposition unmatched by the public sector
- Financial strengths: often outperforming governments (critical public debt/GDP ratio)
- Ever-increasing capabilities to execute flawlessly and to learn from mistakes
- Command & Control structure led by the CEO focused on delivering enduring results and value to share/stake-holders
Public Sector (the reverse)
- Vision: primarily local due to the electoral voting system, lack of understanding/forging of complexities
- HR: talent acquisition, rare if any
- Financial strengths: critical public debt/GDP ratio, deficits
- Slow reform processes (if any)
- Emergence of a void in the intermediation between market forces and the public good
- NGOs acquiring incremental influence, yet not democratically representative
- Social media over-utilized fro “instant and quick” simplification of the reality
An époque of changes
A change of époque
Compared to the recent “Époque of changes” dictated by technological revolutions, this is a “change of Époque ” because it revolutionizes the spheres of influence and social competence in favor of corporations.
According to Edelman’s 2018 Trust Barometer, trust in governments, media, non-governmental organizations and, to a lesser extent, in companies is in free fall. The worst performance is that of the United States, which is losing 9 trust points year on year. The US government at the end of 2017 enjoyed the confidence of 33% of the population. A new space has opened up for CEOs and top management as agents of influence and change, in line with their core business. 64% of respondents, in fact, ask for CEOs to exercise leadership and make necessary changes without waiting for the government to show the way.
After World War 2, global governance entered into a new era. Western governments commanded solid and respected leadership. In the mid-1980’s the G5 (USA, Germany, Japan, France, UK) realized that the economy needed a collegial intervention. On September 22 1985, finance ministries from the world’s five biggest economies announced the Plaza Accord. The US current account deficit stood at 2.8% of GDP in 1985. It took 2 years to adjust topping 3.4% in 1987. On Wall Street, the Dow Jones fell 23% in one day — October 1987. Each country made specific promises on economic policy. America pledged to cut the federal deficit, Japan promised a looser monetary policy and a range of financial sector reforms, and Germany proposed tax cuts. All countries agreed to intervene on currency markets as a necessary step towards to get the dollar down. By the end of 1987 the dollar had fallen by 54% against both the D-mark and the Yen from its peak in February 1985. In 1987 another big international plan, the Louvre Accord, was hatched to stabilize the dollar.
This era of the 1980 and 1990 was characterized by:
Institutions and Governments: Demonstrated leadership in managing the issues of public society (1980s Plaza and Louvre Accords). Led the intermediation between market forces and social well-being. Elected officials were respected opinion leaders
Corporations: Local and regional. A step-behind political leaders
Civil Society and NGOs: At the infant stage, the had just started to organize and gain influence
Media: Mainly TV and Radio. Centrally controlled. Opinion-making process driven by the center: discretionary selection of news, informs and creates opinion
Globalization has altered such an equilibrium and has brought about a new paradigm:
Institutions and Governments: Passive actors of the globalization. There has been a deteriorated in both their understanding of the phenomena and their capabilities to intermediate between market forces and community interests
Corporations: Became global players, defined complex international value chains, built competences, harnessed talents, increased their capability to execute and to learn from mistakes
Civil Society and NGOs: Intervene where Institutions/governments fail. People are more aware of their role and power of influence. However, NGOs lack democratic legitimacy
Media: Atomized (i.e.. Internet impact). Changed opinion making process: from the center to the periphery (i.e. Blog). Info available “à la carte”, but is not necessarily reliable
IRG TM recognizes such a change in the societal context. It goes beyond Corporate Social Responsibility (CSR), though it accounts for it, and the reputation. It addresses the heart of development: corporations. It provides a holistic operational solution by recognizing that, compared to the 1990s the societal context and its sphere of influence and competence (Government, Corporations, NGOs and Media) have structurally changed. It helps the alignment of the organization to this new operating context. This globalization, which has perhaps paused of late, is the first in history to be based on the “rule of law” instead of on armies. For the first time in history, CEOs and corporations are more experienced, competent and visionaries than any other constituency.
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