Values Added

Do you have to be bad to be good at business? Why are American managers so afraid of ethics? James O'Toole, author of Vanguard Management, champions values at the key to corporate greatness.

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In vain, says James O'Toole, will managers search for excellence by wandering around. Skunkworks do not smell of it, nor can it be spun out of quality circles. Corporate cultures do not always incubate it, and neither, says he, will proximity to the customer guarantee it.

O'Toole suggests ethics. At the core of his new book, Vanguard Management: Redesigning the Corporate Future, is the argument that corporations achieve excellence primarily by adopting a philosophical orientation. Accusing most of his competitors of "oversimple solutions," he tweaks Allan Kennedy, author of Corporate Cultures, for "doubtful literacy" and dismisses Tom Peters by insisting that "today's so-called excellence is the enemy of greatness."

Only morality, proposes this management professor at the University of Southern California, only a comprehensive sense of responsibility can lead corporations to their full potential. To succeed, managers need a generous sensitivity to their four most important "stakeholders" -- their customers, their employees, their management, and the larger public. He sees management not as a problem to be solved with a list of rules, but as a process that depends most of all on "high purpose." Today's corporations -- as well as most business consultants, writers, and academics -- have mistaken the end for the means, confusing the need to attain short-term profits with the end of meeting the needs of society, consumers, and employees. Meeting those needs, O'Toole insists, can lead to profit as well, and he builds his book around companies that have managed to follow a moral path to a healthy bottom line.

Like Tom Peters and Allan Kennedy, James O'Toole launched his career as a management guru from McKinsey & Co. A Phi Beta Kappa graduate of the University of Southern California, a former Rhodes Scholar, and holder of a doctorate in social anthropology from Oxford University, he joined the San Francisco office of one of America's largest consulting firms in 1969, when he was 24. O'Toole, however, never fit into the McKinsey mold. "I really hated it," he remembers. "They just had certain formulas they plugged in." Within six months he quit, moving on to become chief field investigator for the President's Commission on Campus Unrest; then a special assistant to Health, Education & Welfare secretary Elliot Richardson; chairman of HEW's Task Force on Work in America; and, eventually, director of the Aspen Institute. He joined USC's faculty in 1971.

At a time when most faculty experts are becoming ever more specialized, O'Toole has remained a resolute generalist. Besides holding the University Associates' Chair as a professor of management, he edits New Management magazine. His nine books and 70-some articles have addressed everything from pollution to the energy crisis, from Woodstock to the nature of work. But it is for his views on tenure that O'Toole is best known around campus. He wasn't the first professor to argue that tenure was counterproductive, but he may be the first to have relinquished it as a matter of personal principle.

Senior editor Curtis Hartman interviewed O'Toole in his office at USC, where a bumper sticker on his door proclaims, "I'd rather be dead than excellent." They began their discussion by talking about the morality of two of the companies lauded in Tom Peters's bestseller.

INC.: PepsiCo and Philip Morris -- haven't you demned them almost out of hand?

O'TOOLE: I plead guilty to a slightly moralistic tone. I wish I could be tough-minded and talk only about the bottom line. But if you've got a product that's hurting people, like cigarettes, somewhere along the line it's going to have an effect on management. For example, when I visited Philip Morris, all the managers were smoking. There's got to be pressure on them to smoke. You'd think that somebody would say to himself . . .

INC.: I don't want to kill myself for this job.

O'TOOLE: Right. Or kill someone else. They know that tobacco causes lung cancer, they've got to know that. Yet they're constantly saying things like the links are inconclusive. To say things like that, you have to lie to yourself. I don't think that you're going to get the very best managers in a corporation that requires people to tell lies to themselves.

INC.: And you make the same case against carbonated, sugared drinks.

O'TOOLE: I'm saying that you need an organization in which there aren't any taboo subjects. I think taboo subjects lead to more taboo subjects, to a kind of denial of reality that extends everywhere. I once asked a vice-president of PepsiCo whether anyone ever discussed the ethics of pushing sugared drinks in the ghetto. I was asking about the propriety of making special efforts to sell junk food to people who probably aren't getting the correct nutrition. What he said was, "If you raised that question you'd be out on your ear."

Well, it would worry me that you couldn't raise that question. It could well be that what PepsiCo does is right, but I don't think it's right that they can't raise the issue.

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