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Why companies go woke, with Peter Klein
1.2k Plays2 years ago
Almost every big company has embraced woke policies and attitudes over the last five years, despite little evidence they improve business performance.
Host Will Kingston explores this paradox with American economist and management thought leader, Peter Klein. In 2022, Peter made headlines in business sections the world over for a paper he co-authored, titled ‘Why Do Companies Go Woke?’
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Transcript
Introduction and Key Question
00:00:00
Speaker
Today, we ask the question that has crossed almost every employee's mind, but very few employees' lips. Why do companies go woke?
00:00:08
Speaker
Before we uncover the answer, I'd like to give a shoutout to one organisation that isn't going to work any time soon. The Spectator Australia magazine is everything locusts aren't. Bold, intellectually curious, sceptical of authority, and capitalist, but never fear because with digital subscriptions for just $16.99 a month, with one month free to boot, you'd swear we weren't.
00:00:33
Speaker
To take advantage of this sensational offer, go to spectator.com.au forward slash join.
Podcast Introduction
00:00:54
Speaker
G'day and welcome to Australiana from The Spectator Australia, a series of conversations on Australian politics and life. I'm Will Kingston. Something magical happens between the third and fourth beer at company social events. The guards drop, the awkward formality subsides, and the boss normally heads home to the wife or husband and kids. It's at this moment that unspoken office truths start to emerge.
00:01:22
Speaker
Is Ed from sales as a tosser? Or so what are you really making? Or I actually quite fancy Lucy and accounting. It's only after six or seven beers though that the sacred cow enters the conversation. So what was that whole DNI module about then? That unconscious bias trainer told me I'm a racist. I don't think I am.
Identity Politics in Corporate Culture
00:01:45
Speaker
And eventually all this stuff just does my head in.
00:01:51
Speaker
The creep of identity politics and woke ideology into the corporate world has been the biggest change to corporate culture in the last decade. But everyone is afraid to talk about it critically. Well, almost everyone.
Exploring Woke Ideologies with Peter Klein
00:02:04
Speaker
Peter Klein is an American economist and global thought leader in managerial and organizational strategy. He holds the WW Carrath Endowed Chair at Baylor University in Texas, and he has written several very successful books, the most recent of which is titled Why Managers Matter, The Perils of the Bossless Company.
00:02:24
Speaker
Peter came onto my radar in 2022 for a paper he co-authored which made headlines in business sections the world over. It was simply titled, Why Do Companies Go Woke? Peter Klein, welcome to Australiana. Well, thanks for having me.
00:02:39
Speaker
Let's get the definitions out of the way first. I'm conscious that whilst almost everyone who works in an office will have been exposed to wokeness or woke capitalism in one way, shape or form, there are several people who may not be aware of what those terms actually mean. Can you define them for us?
00:02:59
Speaker
Yeah, the term woke has become politically charged, especially in the US, but I'm sure in Australia as well. And there are some folks who I would describe as proponents of woke ideas who were sort of disclaiming the label. Oh, no, no, we don't mean that. We just mean kindness or being nice to people.
00:03:18
Speaker
or we just mean fairness and truth and justice. That's not at all what we have in mind in this research project. We have a specific definition of woke in mind, like all definitions, right? It has pros and cons, but I think most people have a fairly good understanding of what we mean
00:03:38
Speaker
when we use the term the way we do, which is, wokeness refers to a primary concern with issues related to social justice, so-called, especially as they concern things like race, gender, sexual orientation, sexual identity. But woke is a little bit more specific than that.
00:03:58
Speaker
in that wokeness represents a particular philosophical perspective on that set of ideas. The philosophy originates from what is sometimes called critical theory, a branch of philosophy that emerged in Germany in the 19th century, the so-called Frankfurt School, also French postmodernist thought fits into this story. But what are these philosophical origins or foundations? They have certain pillars such as
00:04:26
Speaker
A belief in the primacy of subjective personal experience over sort of objective data and scientific reasoning and argument and so forth. A belief that individuals are defined primarily by their group characteristics and that people think and act primarily in accord with characteristics of their groups. And likewise an emphasis on
00:04:51
Speaker
you know, sort of social structures and power relations among groups as the primary determinant of, you know, how history plays out and indeed how ideas are decided. So the idea that truth is positional, truth claims are positional. Your argument cannot be evaluated without talking about your power position in society or in an organization. That is really fundamental to woke attitudes and beliefs.
00:05:19
Speaker
this sort of oppressor victim dynamic that all situations have to be analyzed in terms of who has power, how is that power being used, and how does that power influence people's beliefs and actions.
Marxism vs. Corporate Wokeness
00:05:32
Speaker
One other aspect of wokeness that comes from Marxist theory, why you sometimes hear the term cultural Marxism,
00:05:39
Speaker
So what people mean by cultural Marxism is Marxist tools and concepts and analytical frames, not applied to factory conditions and so forth, but applied more broadly to the culture. So the idea that you have an
00:05:55
Speaker
exploiter and an exploited class, an exploiting and an exploited class comes out of classical Marxism, but it's not capitalists and workers. It might be, in this case, males being the exploiters, females being the exploited, or it might be in terms of race or one of these other demographic.
00:06:13
Speaker
characteristics. But there's also the idea that history progresses sort of inexorably in one particular direction. You know, Mark Stoff, there was this inevitable trend, you know, capitalism would be replaced by socialism and communism and so forth. And within wokeness, there's also the idea that the move towards more, shall we say, progressive attitudes on social and cultural issues is sort of inevitable. Where you see that is where people use the term
00:06:42
Speaker
you know, so-and-so is on the wrong side of history. Well, I mean, historians would tell you history doesn't, we don't know where history is going to go, but if you believe that anybody who's resisting a particular sort of progressive attitude or belief is sort of messing things up by trying to hold progress back, that again comes straight out of Marx and other social scientists, but it's been embraced by people who are interested primarily in social and cultural ideas today.
00:07:10
Speaker
This is fascinating because the historical arch-enemy of Marxism is capitalism, and yet so many companies have embraced what, at face value, could be perceived as a Marxist ideology. We'll get to why you think that's happened in a moment, but first, let's put this in a historical context, because things like social responsibility programs, things like affirmative action quotas,
00:07:38
Speaker
These are nothing new. Is wokeness and woke corporate policy merely an extension of long run trends or are we seeing something entirely different and new?
Wokeness as Social Responsibility
00:07:52
Speaker
It's a great question. Yes, in some sense, I think it is a continuation of a trend that really goes back maybe to the 1950s and 1960s with the Civil Rights Movement and the first round of so-called affirmative action policies. In one sense, wokeness is a continuation or acceleration of those older trends, but we also think it's qualitatively different, again, because of these philosophical foundations that we've already described.
00:08:20
Speaker
So, you know, one could believe in a particular labor market policy, for example, to promote, to remedy past discrimination, let's say, without buying into the full, you know, menu of woke attitudes, beliefs. When you hear people say,
00:08:36
Speaker
Math is racist or XYZ is a manifestation of perpetuating whiteness and so forth. I mean, that's a whole, there's a coded language there. There's some sort of in-group, out-group signaling going on. None of that was really present with the older movements for companies to think more about social, cultural, and political ideas, though obviously you can see some commonality.
00:09:03
Speaker
And we also think when we get into some of the mechanisms that we think are pushing companies to embrace wokeness, there are also some parallels with reasons why companies might embrace ESG or stakeholder governance or something similar to that. That makes sense.
00:09:20
Speaker
One more question to set the scene. You said in your paper that this is a cross-industry phenomena, but at the same time, there are some industries which are adopting work policies more aggressively than others. The media, tech, entertainment are about three examples. Why do you think that this trend is accelerating at different rates or there are different appetites, I guess, in different industries for these types of policies?
Industry Variation in Wokeness Adoption
00:09:49
Speaker
Yeah, I don't have a solid answer for that, but I have some conjecture. Part of our argument is that woke policies or the woke policies that we're interested in do not primarily benefit shareholders or other stakeholders who would conventionally be included as part of the firm's sort of key ownership or management or governance block.
00:10:14
Speaker
In other words, the puzzle we're trying to explain is why companies embrace wokeness, even though it doesn't seem to improve the bottom line. So one argument you could make is in some industries where margins are thinner, where competition is tougher, and where kind of the market reaction from customers or from competitors, you know, makes it very difficult
00:10:38
Speaker
to make a mistake, you know, a very unforgiving environment, companies are a lot less willing to experiment with wokeness other than at a purely superficial level. But if you're in the news media or entertainment where the potential cost from embracing wokeness is smaller, if you're in manufacturing, right, if wokeness leads to lower quality manufactured products or more manufacturing defects, you're not being able to satisfy customer needs or whatever,
00:11:06
Speaker
I'm not saying that it would in every case, but if wokeness has an immediate impact on productivity and profitability, then you're going to be less tolerant. Management will be less willing to allow woke ideas and so forth to proliferate. Whereas if you're Google or Apple,
00:11:26
Speaker
Right. Most of the workforce is already pretty woke as defined above. Many customers either themselves are woke or they are pretty neutral or indifferent to the company, you know, embracing wokeness and, you know, woke programmers can program just as well as non woke programmers. Then, you know, there isn't a lot of harm.
00:11:49
Speaker
for Apple or Google or Twitter, and I use Twitter, Twitter's deliberately chosen because things may have changed there, right? If you find, as in the Twitter case, you know, that, I mean, it appears, we don't know everything, but it looks like management has made the workforce significantly smaller and the product still seems to be functional, you know, that suggests that there was a lot of surplus, that there were employees in HR and DEI and so forth,
00:12:18
Speaker
whose work wasn't core to the company's mission, the company may actually be able to perform better by reducing some of that surplus labor.
Middle Management's Role in Wokeness
00:12:31
Speaker
That's an example where now it looks like excessive wokeness could be harmful. And so we would expect to see competition among tech companies leading others to sort of trim their unnecessary labor.
00:12:45
Speaker
Yes, we'll get to the impacts of woke policies on companies a bit later on. And I also want to hold fire on how companies go work, which is the central thesis of your paper. And it's and it's a very compelling one. A bit more on the why why companies choose to go work. Now, you actually just flagged a couple of reasons which some people may think are behind a move to work corporate policy.
00:13:12
Speaker
But actually, there is no evidence to suggest that they are motivating forces. One is you suggest that there is no real evidence that companies financial performance improves through work policies. Can you expand on that?
00:13:26
Speaker
Yeah, sure. So, again, the kinds of things that we're defining as woke are typically things that are not directly related to producing the product, for example. So, for example, advertising and marketing campaigns that feature particular, you know, try to reflect certain values that are not
00:13:45
Speaker
embraced by the customer base, by the core customer base, would be an example of a woke attitude that does not seem obviously to improve performance. In the US, a classic example might be the Disney company. So Disney, of course, has been in the news quite a bit for what it's done and what it hasn't done, particularly in the state in which it operates, Florida, which has a governor who explicitly promotes himself as an anti-woke governor.
00:14:13
Speaker
There's no evidence whatsoever to suggest in fact survey data implies that the typical disney patron someone who watches disney movies and consumes you know goes to disney world is not at all interested in the sorts of things that were describing as woke.
00:14:32
Speaker
So some employees at Disney clearly are enthusiastic about wokeness. Senior management, we're not quite sure. Some parts of middle management are clearly enthusiastic for woke, but it's not obvious why this would improve Disney's bottom line. So essentially what we're saying is, look, if you have an organization and it could be anything from a startup to a giant corporation,
00:14:56
Speaker
in which we can show that being woke is exactly what customers want or allows the firm to attract the most talented employees. Well, I mean, then there's no problem. There's nothing to discuss. Then there would be no puzzle to explain the sudden. Now we might still wonder why did it change so much in the last five years? How come six years ago customers didn't want this, employees didn't?
00:15:20
Speaker
But still, there wouldn't be that much of a story. We're arguing that if you look at survey data on attitudes of customers, attitudes of typical workers, and attitudes of executives, attitudes of DEI people are a little bit different.
00:15:35
Speaker
do not show any increase, any rapid increase in the embrace of these woke ideas and practices. So it can't be that companies are simply responding to what the marketplace wants because otherwise it would be easy for us to detect these changes in preferences among key stakeholders and we don't see that.
00:15:55
Speaker
Yes, I think paradox is precisely the right word here. You think about marketing functions and their job is to grow the customer base. And yet, so many of them are now specifically doing things that annoy their customers. The best recent example in Australia is from SeaFolly, it's a bikini brand. And their marketing strategy in the past was simple but effective of find a beautiful young lady and put a SeaFolly bikini on her.
00:16:23
Speaker
And they've just come out and put a trans person as the bikini model in their most recent campaign, and there's been a very pronounced backlash. So teasing out this question of why a bit further, your paper puts forward two very logical motives.
Motives Behind Woke Policies
00:16:42
Speaker
One, we think this will make us money, and two,
00:16:45
Speaker
we think this is the right thing to do i'm aware they're not mutually exclusive but of those two motives which one do you think is the more powerful driver towards work policies in most companies.
00:16:58
Speaker
I think both of those motives are clearly in play. A lot of what looks like corporate wokeness is this so-called instrumental wokeness, meaning we're pretending to be woke because we think it gives us some kind of competitive advantage. It helps our bottom line. You know, maybe some of these advertising campaigns like the one that you mentioned, there was one in, it was Hershey's of Canada, I believe.
00:17:20
Speaker
that also for International Women's Month in February put a trans person on the candy bar wrapper and as the face of the advertising campaign, a trans woman, a male to female transgender person. But this got a lot of attention. Is this just a way of building brand awareness? I mean, you could make that argument. Indeed, some of the most enthusiastic proponents of wokeness are somewhat skeptical of what big corporations do.
00:17:49
Speaker
You know, yes, we made our we changed our corporate logo to have the pride flag as the background. You know, we made it the rainbow colors for a few weeks and then we went back to our regular logo. Yeah, that that doesn't actually do anything for for the people that those symbols are allegedly representing. It's what they call, you know, so-called woke washing.
00:18:10
Speaker
And to me, there's an analogy here with some of the things you asked about before, like CSR, for example. I mean, if you're a coffee chain, Starbucks or whatever, you know, if customers will pay a premium for a beverage that is advertised as coming from sustainable farms, okay, that doesn't cost the company anything. I mean, that's not sacrificing profitability for social justice, so-called. That's just maximizing profits. That's just increasing firm performance.
00:18:39
Speaker
corporate wokeness surely has that character. And some of it, you know, you're kind of doing it because it's the thing to do. Everybody's doing it at least a little bit. You don't want to be the odd, odd man out. So you sort of go along with the trend. But that begs the question of how the trend sort of got started in the first place. Why is anybody doing it?
00:19:00
Speaker
Right again, with the exception of maybe, you know, a startup company that is founded by a group of superwoke employees and their corporate mission is to promote wokeness. Aside from that, why is it occurring? And that's where this kind of normative motive comes in. But, you know, our story, which, you know, as you know, is that it really isn't the organization as a whole that's promoting normative wokeness and it really isn't managers, it's someone else.
00:19:27
Speaker
That's a cliffhanger for listeners and I'm going to build the suspense a little further by pausing to remind them of the wonderful print and print and digital bundles available to them from the Spectator Australia. There's content about work corporate specifically every other day of the week. I was reading a cracking article from Edmund Steven only this morning on the role that woke big tech companies are playing enabling the yes campaign in the voice debate. Pick up a subscription at spectator.com.au forward slash.
00:19:57
Speaker
Okay, with excitement now at fever pitch, Peter, lay out your thesis for how companies go woke. So I'll confess that we were inspired to come up with this thesis, to offer it as a theoretical explanation for this paradox by observing in the industry that my co-author and I are very close to, namely higher ed.
00:20:22
Speaker
So my co-author and I have been professors for several decades, and we've observed universities, of course, going extremely woke and even being politically correct, which is sort of the predecessor, I guess, to wokeness. And kind of the surprise to us was that one often thinks, well, yes, of course, universities are going to be way out there on the frontier on whatever kind of issues one is talking about, because that's the nature of a university. It's filled with all these
00:20:50
Speaker
They're ideologically committed to the avant-garde and to radical new ideas. We don't think that's actually the case. We think the average university professor is not especially politically correct, as we used to call it, and is not necessarily committed to wokeness, nor do we think that university presidents
00:21:11
Speaker
boards of directors curators whatever you call them we don't think senior leadership at most institutions of higher learning are necessarily committed to woke ideology however there is a hardcore or rather i should say there's a core of very committed supporters.
00:21:29
Speaker
to woke ideology, which are typically kind of found at the middle levels of the organization. So in HR or the DEI team or at universities, we have administrators that do sort of student life programming.
00:21:45
Speaker
Again, I don't want to make this all about higher ed, but one of the observations about universities in recent decades is that the number of professors hasn't increased that much and the number of executives hasn't increased that much either. But the middle ranks of administrators have just exploded. So what we observed is, you know, the strongest advocates for certain kinds of woke policies are the second assistant vice provost for diversity, equity and inclusion.
00:22:13
Speaker
It's not the president, nor is it the students, nor is it the rank and file faculty. It's the sort of empowered middle managers who are responsible for certain kinds of programming. In the corporate world, this would typically be people in HR.
00:22:28
Speaker
People who are responsible for running diversity training programs people in public relations and some parts of marketing who are really strong advocates of woke ideas woke imagery woke language and our argument is that both senior management and lower level employees.
00:22:47
Speaker
sort of go along, even though they're not necessarily enthusiastic about, nor do they really understand or feel comfortable with these policies and these actions, but they're terrified of being portrayed as being anti-woke, you know, holding back the wheels of progress, as we mentioned before. So they delegate a lot of authority to people who are strongly committed to one specific viewpoint, one specific ideology.
00:23:16
Speaker
Yes. And that goes to the specific ability that middle managers have to drive these policies, which is one of three reasons why you say that middle managers are particularly well positioned.
Middle Management's Influence and Power
00:23:28
Speaker
The second is that this presents itself as an opportunity for middle managers to increase their relative power in the organization. Can you expand on that part? Yeah, sure. I mean, imagine that, you know, the spectator
00:23:44
Speaker
was considering a changing, it's having less print content and more podcasts. And you happen to be the top podcasting authority within the organization. You're assistant vice president for this kind of medium.
00:24:01
Speaker
Right. And you're in a board meeting or you're in a committee meeting or you're in, you know, you're having a discussion in the firm about where the priorities should be. How much should we invest in the traditional print publication, the physical paper? I'm not even sure if you still produce a physical version. Will in the Spectator Australia production studio here telling our listeners that we most certainly do have a print magazine and you can get a print subscription at spectator.com.au.
00:24:29
Speaker
Also telling our editorial team that I have no plans for a podcasting related coup. Back to you, Peter.
00:24:36
Speaker
How many copies should we print? How much effort should go to print media on the website? How much should go to video, audio? If you were in a position to influence that discussion and all you do is audio podcasts, it wouldn't be shocking if you were to come out as a strong proponent of a podcaster-led model, especially if you're the only one in the organization who feels comfortable with that medium. So self-interest wins out, basically.
00:25:03
Speaker
Absolutely. And this is not a slight, this is not a criticism of DEI personnel, for example, but of course it would be in their interest to make sure that the firm is committed to a set of actions that makes them more necessary than they otherwise would be. And even people who don't have DEI in their title specifically potentially see an opportunity to increase their sphere of influence by taking this turf for themselves?
00:25:32
Speaker
I think that's right. Yeah. Anyone who sort of buys into the program, again, using the appropriate language. And as we mentioned in the paper, there's a lot of terms that are really odd to most English speakers, but it's sort of the natural, you know, centering whiteness or the Latinx community and so forth. People don't speak this way outside of a very narrow community.
00:25:55
Speaker
But if you want to make yourself part of that community, make yourself potentially more valuable, your job more secure, embracing that language, embracing that imagery can help you. And Will, if I may jump in with one clarifying point, you hinted at this early in the podcast, but I want to state it very explicitly for all our listeners. One sort of rhetorical move that proponents of wokeness make is they say, oh, you're criticizing our DEI programs,
00:26:24
Speaker
What? Are you opposed to diversity? Do you oppose equity? You don't like inclusion? You think people shouldn't be included? They should be excluded? You know, it's like the old joke. One can oppose the Democratic People's Republic of Korea. Opposing that doesn't mean you're anti-democratic, right? Or that you're anti-people or anti-republic or anti-Korea. Quite the opposite.
00:26:48
Speaker
So the North Korean communists can label themselves whatever they want, but obviously that's a trick on their part. And it's a way of saying, oh, if you don't support us, you oppose democracy. When I use a term like DEI, I don't mean diversity the way you would define that term in the dictionary.
00:27:07
Speaker
That's an idiosyncratic label that means a specific approach to the issues that we've been talking about here today. So we must never allow proponents of woke ideas to retreat. In philosophy, they call this the Mott and Bailey technique
00:27:26
Speaker
It refers to, you know, medieval castles where you have the part that you can, the stronghold, and then you have sort of the part that's easy for the enemy to get to. And when the enemy attacks the easy part, you retreat to the stronghold. So what people often do is they say, you oppose DEI. Well, DEI just means being nice to people.
00:27:47
Speaker
just means treating people with respect. People should be treated with respect. No, that isn't at all what it means. We're talking about very specific kinds of programs and activities, not the general ideas that their terms seem to represent. Social justice would be a classic example, one that F.A. Hayek and others wrote about back in the middle of the 20th century, when we say social justice, capital S, capital J,
00:28:14
Speaker
We don't mean social justice in the colloquial sense. We mean a very specific ideological program that many reasonable people don't support.
00:28:23
Speaker
Yes, this has been the the evil genius of the left in recent times. They've taken control of language and they've then created a false dichotomy that says agree with absolutely everything that we believe or you're a bad person or you're evil. And what they're asking people to agree with is very specific and it is a very revolutionary world view.
00:28:50
Speaker
Now, whatever you think of woke policies, we must be able to agree that that is not good for public debate and it's not conducive to open and transparent conversations in the workplace. And this is the interesting thing for me. You said before we went on air that you thought this was actually a pretty vanilla
00:29:11
Speaker
You were surprised by the level of controversy that it has stirred up. I think that's because people have gone, wow, I didn't know I was allowed to talk about this stuff. Why do you think that's the case? Why do you think so many people are afraid to say what they believe in corporate environments today?
Fear of Discussing Wokeness
00:29:29
Speaker
Yeah, well, for precisely the reasons that you mentioned, people who are proponents of wokeness have used language and they've sort of tried, and I guess successfully, to define the terms of the debate. So that even to do what we've done in this paper, which is not to critique or attack wokeness, but to treat it as a phenomenon that needs an explanation, even that is perceived as somehow
00:29:57
Speaker
inappropriate or unethical or mean-spirited or hateful. I've been a little bit surprised, maybe I shouldn't have been, by some responses we've gotten from fellow academics who, without really engaging our thesis at all, have essentially said, well, it's wrong of you even to talk like this.
00:30:16
Speaker
Right? I mean, to analyze wokeness as if it might not be a good thing is like to write a critical paper on puppies or something. I mean, how can you even entertain the possibility that wokeness might be anything other than kindness and universal justice and treating people with dignity and so forth? Which, I mean, look, if someone wants to make that claim, that's fine, but we would love to see some
00:30:45
Speaker
positive engagement with our thesis. Like any other scientific thesis, it can be critiqued, it can be challenged theoretically or empirically, but there really hasn't been much engagement. No one has really offered a good argument for why our thesis might be incorrect. They've just sort of said, how dare you bring this up?
00:31:03
Speaker
So to summarize very simply, if you look at a company as the C-suite at the top, frontline employees at the bottom, and then this glut of middle management in the middle, it's that middle management layer that is a driving force behind Wokeness. I want to investigate that middle management by looking at two departments specifically.
00:31:25
Speaker
marketing and HR, marketing driving the woke push on the external side and HR driving it in terms of internal culture. I can't get my head around. I know we've had this discussion now for 20 minutes, but I can't get my head around how marketing is responsible for growing the customer base. And at the same time, they are adopting woke messaging that customers don't like.
00:31:52
Speaker
Talk to me about this tension within the marketing department. Yeah. So clearly some of these woke campaigns have been unpopular. The Gillette razor, I think it was a year ago, is a famous example where Gillette put out a marketing campaign criticizing toxic masculinity.
00:32:12
Speaker
with the ads having to do with razors or shaving, promoting a particular view on maleness and problems with power relations among the sexes. And Gillette's razor sales took a huge hit, plummeted. And no one would be surprised to see a razor ad with transgender, female to male, sorry, male to female people shaving. That being part of the best a woman can get would be part of this as well.
00:32:42
Speaker
I assume that people who are running those marketing campaigns lost their jobs, right? So, I mean, you know, Gillette is still doing okay. But we assume that there is some response to market feedback, but you would think that, or it seems likely that a little bit more leeway and slack is given, because whoever came up with that anti-toxic masculinity ad campaign can say, oh, yeah, well, it looks like that didn't work so well for us.
00:33:09
Speaker
Clearly, my heart was in the right place. Clearly, we were trying to promote justice that, gosh, that isn't going to work, maybe because our customer base is evil, evil. People who don't care about justice or whatever, that's a shame. Maybe we'll try again in a slightly different way, as opposed to in a conventional pre-Woke era, where if a marketing campaign bombs or look at a lot of films, a lot of Hollywood films that promote or explicitly woke have not done well at the box office.
00:33:38
Speaker
And look, I mean, that's the cinema industry is an industry just like any other. And there are investors who want to make financial returns. But, you know, partly because of the nature of that industry for reasons that we mentioned before, there's probably more tolerance for woke failure than there would be in manufacturing. Let's say some of that. It's not unlike the book publishing industry where publishers. It's hard to predict which book will be a best seller.
00:34:06
Speaker
And so most editors have a pretty broad portfolio of books. The investors just want one or two to be a hit. They don't really care about the others, which gives editors a lot of latitude to indulge their own personal preferences in which books they will publish. And so that could be a reason why you see a little bit of a bias, more kind of woke-ish books get published than anti-woke. And I think it's the same thing with cinema. You just need one blockbuster.
00:34:34
Speaker
a few other movies that don't do so well. Well, if they were ideologically pure and true, we'll cut you some slack on that. That makes a lot of sense. The HR department is leading the push to change corporate culture internally and moving it towards a more woke orientation. Your earlier comments about Marxism come to mind here because traditionally HR departments have been at the bottom of the ladder when it comes to corporate prestige.
00:35:04
Speaker
How do you think about the changing role of HR and specifically how their job is evolving to from being an administrative function to something which they may argue has more purpose around it in pushing a particular ideological worldview?
HR's Expansion Through Woke Policies
00:35:22
Speaker
Yeah, if I could answer in a slightly roundabout way, start with something more general, then get to this specific answer.
00:35:28
Speaker
You know, HR and similar functions that are either middle management or lower middle management or sort of execution. The traditional conventional way we understand those roles is that, you know, there are intermediaries between the executive level, the C-suite, and employees of the firm, and those middle layers, they perform specific functions. In the paper referring to existing literature, we characterize these as bridging and brokerage
00:35:57
Speaker
So the bridging function is helping to channel foes of information up and down, you know, helping to interpret management dictates to lower level employees, helping senior management to understand what people on the ground are doing and how they're feeling and so forth. And there's also kind of a brokerage function, which is to help negotiate agreements
00:36:16
Speaker
help to bring people together, make sure that everyone is on the same page. Neither one of those is like a strategy initiation role. Those are strategy implementation roles, but part of what we're arguing is that we often see in woke companies middle managers becoming the initiators of new ideas and strategic change rather than the implementers. And to get to your specific question, I mean, it's very simple to explain
00:36:43
Speaker
with a sort of self-interest story, right? So if the function of HR is to make sure the contract gets filled out properly, take care of the paperwork and the tax issues and so forth, well, I mean, that's an important role, but it's not a role in which one can have a lot of influence on company policy. However, if the company embraces a rule that before anyone can be interviewed, we need to have a certain kind of diverse pool of applicants, and before a position can even be approved for hire,
00:37:12
Speaker
There has to be some compelling justification of how it will improve diversity and equity and inclusion within the organization. And then the interview process has to be structured in a certain way and certain kinds of information has to be provided to make sure that diversity goals are being achieved. Well, not only does that mean a lot more work for the HR function, it means a bigger HR staff, more hours.
00:37:36
Speaker
higher pay and so forth, but it also means more de facto influence on who gets hired, right? Which of course, and that can be all the way up to the executive level. Even the CEO, even the search for a new CEO is essentially run by the DEI slash HR function.
00:37:56
Speaker
And those individuals can have a much greater influence on who ends up leading the company and what the company's strategy and so forth will be than in an era where hiring is more routine.
00:38:08
Speaker
Yeah, I think of this as the cocktail party effect. If you go to a cocktail party and you say that your job is filling out paperwork, that's not nearly as exciting as saying that you are empowering people to think about the world differently.
CEOs and Woke Stances
00:38:23
Speaker
Or if you go and say that your job is to flog Coca Cola cans as a marketing manager, that's not quite as sexy as saying that you're saving the world.
00:38:31
Speaker
So obviously middle management is a driving force, but the CEO and the C-suite still are very, very important. There's this emerging subset of CEOs, woke CEOs. The two poster children in Australia are Mark Cannon Brooks from Atlassian and Alan Joyce from Qantas. Is a woke worldview increasingly a box that boards are looking to tick when they're appointing CEOs?
00:39:00
Speaker
To some extent, yes. And some of that is a response to external pressure. One thing we didn't talk about in the paper and an area where we have gotten some useful constructive engagement from critics is some people think that we should pay more attention to external pressure, for example, from asset management companies.
00:39:18
Speaker
You know, if Larry Fink wants you to have a CEO with a certain profile, that can be a big deal, right? So woke asset management companies, woke institutional investors also put constraints on boards and on executives. Do boards want to have a woke CEO because that buys them something from the government, from credit ratings agencies, from the media? I mean, maybe to some extent, but what I think is more likely to be going on is that, you know, CEOs who are in place anyway,
00:39:47
Speaker
or the CEOs who would have been hired for sort of the conventional reasons are more likely to be woke or appear to be woke, partly, I don't want to call it woke washing exactly, but some of that may be a little bit of a PR move. A lot of executives are older white males and they're from a different generation. They're not fully on board with the latest sort of woke jargon
00:40:14
Speaker
terminology imagery and so forth they don't feel super comfortable with it they don't completely understand it but they do know it's you know what we used to call a third rail you know it's a real danger zone if you get it wrong if you say the wrong thing in an earnings call or in a speech if the company makes the wrong move in one of its documents or whatever
00:40:34
Speaker
This could be a nightmare from the media, from government regulators, from boycotts and social media and so forth. So out of fear, they delegate much of that to those who are fully committed to wokeness. I mean, it's almost a catch-22, right? Or maybe I shouldn't call it a catch-22. Maybe it's more like a self-fulfilling prophecy.
00:40:56
Speaker
Right? If I'm a CEO, I've heard about this woke stuff. I'm not sure what it is. I don't want to get in trouble. So I'll just let my speech writer.
00:41:05
Speaker
you know, work closely with the PR and DEI people to make sure what I say is politically correct. But then that reinforces the idea among the company's other stakeholders that the company is committed to wokeness, which further empowers and entrenches the woke enthusiasts who were sort of generating, you know, that content in the first place. So it's a vicious circle or a virtuous circle, depending on your perspective. But it's kind of something that once it gets going, it's very hard to shift direction
00:41:35
Speaker
or change gears. Yes, I think that's a very logical assessment. Could an openly anti-woke person be appointed to a big company as CEO in the US or Australia tomorrow?
00:41:48
Speaker
I think it's highly unlikely, though there are a few anti-woke CEOs of smaller companies, privately held companies. In fact, you would expect, I mean, you know, just the contrarian effect. Ben & Jerry's was doing, you know, CSR before CSR was a thing. That was part of their brand, part of their identity. So one would expect to see a few companies, you know, being, saying, hey, look, we're going against the tide.
00:42:13
Speaker
You have a few, you know, there's T.J. Rogers, who was the CEO of Cypress Semiconductor since the back in the 80s and 90s. You know, I mean, woke wasn't a thing, but he was famously anti politically correct in an era when political correctness was a thing. I think it's unlikely, though.
00:42:29
Speaker
I mean, look, Fortune 500 companies are pretty conservative. I don't mean politically conservative. They don't like to rock the boat, especially on these kinds of issues. They don't want to be in the spotlight. So I think it's unlikely that the trend would be bucked in that manner. But I do find it interesting. I don't know if it's also the case in Australia, but in the US, I mean, even just in the last two or three weeks.
00:42:51
Speaker
there's been an increase in sort of calling it an anti-woke backlash, maybe a little bit too strong. But you have, for example, one of the leading Republican presidential candidates, DeSantis in Florida, is explicitly campaigning that I'm the anti-woke guy. He uses the word woke. A lot of other critics are explicitly using woke terminology as a cudgel, as a criticism of wokeness.
00:43:17
Speaker
And interestingly enough, those who are the most woke are tending to retreat from the label. They say, oh, that label is just a smear term. It doesn't accurately reflect what we believe. So I don't know that that means, I don't know what that means exactly, but there's certainly more discussion now than there was six months ago or a year ago about, yeah, maybe there are some downsides
00:43:39
Speaker
to, you know, woke extremism. And so it wouldn't surprise me. Actually, I can answer a slightly different way. There are a few asset management companies and a few CEOs, particularly of investment firms, that they're not talking about woke, but they're talking a little bit about ESG. There are a few investment companies who said, hey, we only look at financial returns. We will not sacrifice the penny of financial returns to achieve ESG or other goals. So there's a lively conversation
00:44:09
Speaker
in the financial services industry about whether ESG might potentially be counterproductive. That wasn't taking place one or two years ago. It was all ESG all the time. The return of shareholder capitalism music to my ears.
Impact of Wokeness on Companies
00:44:26
Speaker
Let's finish with the impact of going work. Do you think that going work has a net negative or a net positive effect on companies?
00:44:38
Speaker
Yeah, it's impossible to give a global answer to that because there are so many different kinds of firms in different industries. We don't have compelling evidence for an overall trend. There are clearly cases where going woke has had a negative effect on company performance. There are some cases where it's hard to tell or it looks like it looks like wokeness may have even improved company performance.
00:45:02
Speaker
So, I mean, I think that's the right question to ask, but I think it's too early to be able to tell a general story about that. Indeed with almost any corporate...
00:45:11
Speaker
Strategic change or cultural change, you know, whether it's with these other things that we've been talking about stakeholder models CSR or whether it's you know, just a purely technical kind of practice like The lean startup or you know total quality management these things have different effects on different firms and different industries at different times and that's one of the great things about capitalism right that you have a tremendous variety of
00:45:36
Speaker
of different kinds of organizational models and structures and I would expect nothing different here. I think it's perfectly fine if some organizations want to have an explicitly woke agenda, whether it's on the looking inward or customer facing, that's to be applauded. They should certainly be able to try that.
00:45:57
Speaker
I don't think we should have policies, public policies. I don't think universities, consultants, whatever, the business press should be pushing all companies in one particular direction, certainly on this scale. If I could mention one other point that I should have, point I should have made earlier when you talk about CEO. We also mentioned in the paper, there is some benefit, practical benefit to CEOs of embracing wokeness. And it's analogous to discussions about ESG and CSR.
00:46:27
Speaker
Namely, since there is no generally agreed scale for measuring how woke a company is, if a CEO pledges commitment to wokeness, yet performance is poor, financial performance, the CEO can say, well, but we're not about financial performance. We're about wokeness and I'm doing great. I'm killing it. I'm hitting the baseball out of the park on my woke objectives. And when you ask for data metrics to back this up, well, there are none.
00:46:56
Speaker
So some CEOs might prefer an environment with soft performance metrics to one with hard performance metrics because it makes them less accountable. Yes, virtue is an easier target to hit than annual turnover.
00:47:12
Speaker
Final question, I'm sitting in an office at the moment, I can see through the stained glass windows, employees walking all around me, and I think most of them would be uncomfortable having this conversation in the office. But at the same time, I think there is a huge amount of them who feel helpless, who feel like they don't buy into identity politics, they don't buy into its tools of indoctrination, like unconscious bias training.
Encouraging Open Discussion on Wokeness
00:47:37
Speaker
They feel that if they speak their mind they'll be ostracized or even worse fired. Take off your academic hat for a moment and just speak as someone who knows a great deal about business and has spent a life analyzing businesses and employees. What would you say to those people?
00:47:57
Speaker
Well, everyone has to make his own decision about how, you know, how much, what kinds of risks one wants to take. And I think your characterization is exactly right. I think there's, you know, to use the old Richard Nixon term, a silent majority of employees and others who are not sympathetic to wokeness. But, you know, look, their priority is job security. They want to spend time with their friends and family. Why risk all that?
00:48:25
Speaker
to make a public profession against the corporate religion of the day. But I think that just makes it more incumbent among people like you who have a public voice, to some extent people like me, to try to have these conversations in a way that shifts the Overton window so-called to where it is less risky to talk about these kinds of things, to where the average person feels empowered to say, hey,
00:48:54
Speaker
You know, I want to be kind to other people and I want everyone to have a fair shake in life and so forth. But the way you guys are pushing it is counterproductive. I don't support identity politics. I don't buy into this cultural Marxist narrative. I think it's incumbent upon us to be a little bit edgier
00:49:14
Speaker
to make it easier for everyone else to talk about these things openly. They can say, well, I'm not an extremist like that guy on the spectator podcast. Good point about X, Y, or Z.
00:49:28
Speaker
I'm happy to bear the extremist label if it means there is a broader courage culture that emerges as a result of it.
Conclusion and Book Promotion
00:49:39
Speaker
Peter, this is such an important contribution to the discussion around workplace culture.
00:49:45
Speaker
You also have a new book out written with your Why Companies Go Woke partner in crime, Nikolai Foss, that's titled Why Managers Matter. I've got the book on my bedside table ready to go. I'm looking forward to it. Thank you so much for coming on, Australiana. It's been a fascinating conversation. Thanks for having me on the show. It's been a great conversation and look forward to opportunities to speak again.
00:50:13
Speaker
Thank you very much for listening to this episode of Australiana. If you enjoyed the show, please leave us a rating and a review. And if you really enjoyed the show, head to spectator.com.au forward slash join. Sign up for a digital subscription today and you'll get the first month absolutely free. That'll probably also be the case if you sign up tomorrow, but I'm told creating sense of urgency is important in sales.