To find out more about what Handy has been thinking lately, Context Managing Editor Pegeen Hopkins met with Handy in his country home outside London.
 

CONTEXT: While writing your latest book, you’ve thought a lot about the future of business. What changes do you see in the next few years?

CHARLES HANDY: The world is increasingly dividing into elephants and fleas—big organizations and small organizations or self-employed independents.

One reason that so many people are choosing to be fleas, rather than work for elephants, is that ideas have become very important in the knowledge economy. It’s a very bad exchange to hand over the ownership of intellectual property in return for an employee contract.

Though I spent 25 years working for an elephant, today I am an independent, as an author. There is no way that I would give up my royalty status for an employment contract. Why should people in companies who have all the great ideas do that either? I expect more people are going to think like authors and say, "My intellectual property is mine."

Already, more people, in Britain anyway, are selling their services through small corporations to the big corporations. For example, when John Birt became the director general of British Broadcasting Corp., he was not employed directly by the BBC for the first six months he worked there. Instead, there was a contract to hire Birt’s private company. The press said, "If you’re going to lead the BBC you need to be employed by it." So, under public pressure, the BBC reverted to a more traditional structure. But there are plenty of people working at the BBC who have a contract like Birt’s.

Another reason for the rise of fleas is that big corporations are operating more efficiently. I have a formula for productivity: 1/2 x 2 x 3. It means that there will be half as many people working twice as hard and making three times as much money. The other half will be pushed out into small organizations or become independents.

It seems to me that large organizations are increasingly going to be young places. Starting out, people will have apprenticeships in large organizations. After 10 to 20 years, they will either jump or be pushed out of large organizations and live a more independent life.

Five years ago, 66% of corporations in Britain had just one person in them.

This is less common in the U.S. because medical insurance is so expensive. That is a huge drawback that deters people from going out on their own. This is something that must be reformed soon because I believe the future belongs increasingly to the independents.

CONTEXT: Can you talk more about the life of the flea?

HANDY: Being a flea isn’t all bliss. Adapting to life as a flea is dramatic.

You need to belong to something. If other people don’t matter to you, you don’t matter to them. So, you have to build your own community of mattering with friends and colleagues. But, if it becomes too formal, you constrict yourself.

The first thing I did when I left corporate life was to join lots of boards and committees. Then I found my life constrained by the wretched meetings I had to attend, so I resigned from them all.

One great thing about being a flea is the freedom to allocate your time. But with that freedom comes the conflict between money and time. Because you aren’t guaranteed that there’s going to be money coming in, you take on more than you should. Suddenly you have freedom but no free time. You have to overcome that.

It’s terribly important that you end up with some concept of what’s enough in terms of money. If you don’t, you’ll never have any time.

If you want to buy a new house, you have to budget that in. But you have to be aware that if you double your money you’re going to halve your free time. Now, this sounds rather obvious, but when you’re on a salary this kind of thinking doesn’t apply. You know you’d always like more salary, but presumably that doesn’t mean more time. It just means more responsibility or something like that.

The other complication is that you have to sell yourself. You’ve never had to do this in an organization. Elephants buy your time and then market your contribution in some way. When you are on your own, you have to decide on pricing. It’s very difficult. Typically, talented people get somebody else—an agent—to do it for them. In the future, more and more of us will have agents.

I don’t think you can do it on your own. You’ll either overprice or underprice yourself.

CONTEXT: How can people create balance in their lives?

HANDY: As my wife and I started our life as fleas, a few things were happening. Her life was getting submerged in mine because mine earns more money. She had no time for her endeavors. Also, I didn’t have enough time for my thinking or writing because it was too much fun to go around the world to conferences talking to people. If you do that all the time you don’t have the time to write books.

We ended up with an unusual solution, but it’s an indication of what you can do. We decided that six months of the year will be my six months, and my work will have priority. In the other six months, she will have priority. She acts as my agent, and I am the wordsmith for her photography books.

Secondly, we said, "Because we have a house in London and one in the country, we will use them constructively. In the country, we’ll do only conceptual work. We won’t have any social life there. We will have our social engagements in London."

The other trouble is that when you do creative work, you’re always working. If you’re working at home, the tendency is to pick up the fax as it comes through or look at your e-mail. It has become clear that the traditional agricultural world’s way of dividing life into work and time off is no longer appropriate. The five days or six days of work, with Sundays free, doesn’t work anymore. So we have to think differently.

What my wife and I do is take our Sundays, public holidays, and vacation time and add them together. We take those days in three or four chunks and go away to someplace where we can’t work.

Life as a flea forces you to decide what the important things in life are. I have to decide: Is it money? Is it how many books get sold? Is it luscious evenings sitting with my wife under the stars? Or is it a mix of all of them?

The trouble with working for organizations is that it lets you off the hook. You have to do what you have to do, and you fit the rest in as best you can.

CONTEXT: What surprised you most about the elephants and the fleas?

HANDY: I found myself asking, "Why would anyone with spirit want to work in a large organization?" I had to ask, "Why did I ever work for Shell?"

When I got a job there, I sent a cable to my parents saying, "Life is solved." Shell gave me a job for life, salary, travel expenses, car, etc. But at the same time they were telling me where to work and what job to do. After a while I thought, "They’ve taken my life away."

After I married Elizabeth, she asked me, "Are you proud of your work?" I said it was all right. "Are you proud of your company?" she asked. I said I was glad we were providing fuel for those who needed it. "Do you like the people you work with?" she asked. "They are like family," I replied, "They have good and bad points." Then Elizabeth said, "I don’t know if I want to spend the rest of my life with someone who settles for all right."

In my view, the best people will reside on the outside of big corporations because they won’t settle for all right. The big challenge for elephants will be to make sure they don’t end up as the home for the second rate.

CONTEXT: If the best people become fleas, what becomes of the elephants? How do large corporations attract and keep people?

HANDY: It’s a big problem. Even though many talented people are not yet taking my extreme position, they are moving around quite a lot.

Large organizations have to find something to draw talented people in. I don’t think the answer is money. Really talented people can make all the money they want. The real draw is the idea that you can contribute your talent, that you can make a difference, that you can change the world. The talented ones are looking to do this.

Of course, there are many people who just want to make their money and go home. But to retain them you may also need to give them some sense they are contributing in a significant way.

CONTEXT: How are companies going to do that?

HANDY: The theater is one example of a profession that thinks about talent the right way. One of our sons is an actor, so I can speak knowledgeably. People are committed to the project, not the company. My son may be working for the Royal Shakespeare Company, but he’ll tell you he’s working on a specific play.

Corporations are increasingly putting themselves into collections of projects or teams. They’re saying they are doing it because of flexibility. They may not know this yet, but I’d argue that they are really doing this because the only way to motivate people is to give them a chance to make a difference. People don’t want to be just a cog in a wheel.

The impressive thing about theater is that everyone’s name is in the program. The big names aren’t the managers. The big names are the performers.

By contrast, when I worked for a large organization, the name on the door of my office was MKR/34. There was a plastic strip below it with my name on it, as if they were interchangeable. All my correspondence was addressed to MKR/34.

CONTEXT: Does group size matter?

HANDY: In most instances, there should be 100 or fewer people involved in a group. Larger organizations need to break themselves into smaller groups.

My model is federalism. A federal organization is both centralized and decentralized. It has control where it really matters, and it has a lot of auton-omy in the parts.

The interesting thing is that federalism is a political idea. Because people are no longer just "human resources," but are individuals with names, you have to treat organizations like communities. Therefore, the language of politics is increasingly used. People don’t talk about managers anymore; they talk about leaders.

CONTEXT: To follow your political analogy: Do you think that term limits should apply to business leaders as they increasingly do to politicians?

HANDY: It’s a very interesting thing. In politics, the longer your tenure, the less power you have. For example, the British church elects a bishop for life, but he has very little power. Americans set term limits for the presidency. If you get a bad one, you get four bad years and then he’s gone; even if he’s good, he can be re-elected only once.

The political principle is that if you give a lot of power to someone, you should limit the term. I’m in favor of giving quite a lot of power to people on a short-term basis—three or four years—renewable only once.

CONTEXT: There’s no room for executives to stay in power for decades even if they are great?

HANDY: I don’t think so. During the first four years you probably have given all the good you have to give. During the second four years you will make mistakes. Of course, there are exceptions, such as General Electric Chief Executive Jack Welch. History has yet to prove it, but I would expect even he stayed on too long. Most people, unless their power is limited, do.

CONTEXT: Any other changes that you expect in the corporate world?

HANDY: I think women will do well in the world I foresee. It’s one that females understand more easily than most men because it’s not a world of hierarchies. W. Edwards Deming, the management consultant, said that 80% of what’s important in organizations can’t be measured. Women understand that intuition and feelings—those things that can be sensed but not measured—are very important. Most men think that what you see on paper—numbers, for example—are the only things that matter. I think that the numbers are the results of the other things and that the key to success is getting the other things right first. Therefore, men will need to tap into their feminine sides and trust their intuition more.

Women are also much less screwed up by the problems of "fleadom." They aren’t so status-conscious as men. They don’t always need the title. Elizabeth is always mocking me when I want to call myself professor or doctor. She says, "What does it matter? I’ve never been called manager or director. All that matters is getting the job done."

Giving up titles and other symbols of success can be quite tough. I go to conferences and everybody has their names and their titles and their affiliations, and then there’s Charles Handy, blank. At first, I felt awful. But women don’t have as much of a problem with it.

CONTEXT: If the future belongs to the fleas, what will large corporations do?

HANDY: I don’t want to diminish the elephants, because they play a vital role. They produce things. They transfer technology, too. If you have an idea, you’ll need capital to develop it, and corporations can provide that.

Even though companies are going to have to bring in talent on a contractual basis, there are odd worlds that show that that can work. In some way, the solutions for the future are in the past or in the present. We can look to the places where intellectual talent has always been at a premium and see how they are organized. They are organized either like Hollywood, theater, or publishing, or like the professions, with small partnerships.

CONTEXT: To talk for a moment about the more immediate future: What are your views on the economic sluggishness in the U.S.? Do you think the world is now so intertwined that America’s troubles will influence other economies?

HANDY: Economics is a funny thing. It has as much to do with psychology as it does with money.

The situation is too early to call at the moment. My main worry is that the downturn might dent the buoyant psychology of young America, which I always find so invigorating. There’s this idea in America that the future is waiting to be invented and that nothing is impossible. If the downturn lasts too long, it may influence that attitude.

But I don’t think that’s going to happen. There are enough people who say, "The downturn is just a blip." As long as that underlying optimistic psychology of the young remains, the blip will be temporary, the economy will come back, and the correction will be a useful one.

Will the problems in the U.S. contaminate the rest of the world? The common idea is that if America sneezes, we all catch the flu. There’s no doubt that the rest of the world has in some sense latched on to the American economy. But I think the links are looser than some people think. I see the economy as global, not as a hub economy with America at the center and everybody else sitting on the edge.

CONTEXT: Can you talk a bit more about America’s optimistic spirit?

HANDY:What impresses everybody is that in America there’s a sense that the frontier is still out there and that it hasn’t yet been reached, that the future is there to be shaped and that we can have a hand in shaping it.

It’s something that nearly everybody admires and would like to emulate, I think. Whether you can actually copy this is another matter. The American attitude is something deep in the culture, though it is assisted by some technicalities, such as bankruptcy laws that are gentler than in other countries. Countries with long histories end up having long histories of failures, but the U.S. hasn’t got a long enough history for lots of failures. One or two maybe, but not many.

America also has a Puritan tradition, which was exported from Britain and which we forgot to keep for ourselves. The idea is that hard work is good work, and good work is rewarded by money. I find it exciting to be in America and realize that if I made money it isn’t something to be ashamed of, as to some extent it is in Europe. In a funny way, the only good money in Europe is the money you haven’t earned.

I find it very interesting that in America you have all these wealthy people petitioning President Bush not to roll back the inheritance tax. They say that cutting the tax would discourage people from giving back to the community. In America, one is proud of philanthropy, of giving back. In Europe, it’s something you hide away.

America strikes world-weary Europeans as an adolescent nation. It revels in junk food and has adolescent clothes and tastes. It accepts some types of extreme behavior, such as guns and drugs, which some find distasteful. These flaws are balanced as a whole, though, by the enthusiasm of adolescence and the inability to see the downsides of situations.

That’s why I like to get to America at least once a year, to get my energy and enthusiasm and my sense of the possibilities of life reaffirmed. I hope that that never goes.