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 3.3 THE INTERNATIONAL BUSINESS ENVIRONMENT 148 North American Free Trade
3.4 THE ECONOMIC ENVIRONMENT 150 Agreement (NAFTA) 163
Economic development 150 Association of South East
Infrastructure 150 Asian Nations (ASEAN) 163
Economic interdependence 151 STUDY TOOLS 165
Resource and product markets 152 Online study resources 165
Exchange rates 152 CourseMate Express for Management 165
Inflation, interest rates Search Me! Management 165
and economic growth 152 Response to the management challenge 165
3.5 THE LEGAL- POLITICAL ENVIRONMENT 153 Achieving international competitiveness 165
Political risk 154 Discussion questions 166
Political instability 154 Ethical challenge 166
Laws and regulations 155 Quality or closing 166
Group challenge 167
3.6 THE SOCIOCULTURAL ENVIRONMENT 156 Considerations for overseas expansion 167
Social values 156 Case for critical analysis 167
Communication differences 159 Shui Fabrics 167
3.7 INTERNATIONAL TRADE ALLIANCES 160 On the job video case 168
GATT and the World Trade Organization 161 Black diamond equipment: Managing in a
European Union 161 global environment 168

CHAPTER CASE STUDY

The axis of India 138

CHAPTER 4 ETHICS, SOCIAL RESPONSIBILITY AND SUSTAINABLE DEVELOPMENT___ 172

4 .1 WHAT IS MANAGERIAL ETHICS? 176 4 .9 MANAGERIAL ETHICS AND SUSTAINABLE
Ethical management today 177 DEVELOPMENT IN AUSTRALIA 203
The business case for ethics Organisational sustainable development 204
and social responsibility 178 The 'why' of sustainable development 205
4.2 ETHICAL DILEMMAS - WHAT WOULD YOU DO? 179
The 'what' of sustainable development 206
The 'when ' of sustainable development 207
4 .3 CRITERIA FOR ETHICAL DECISION MAKING 181
Utilitarian approach 181 STUDY TOOLS 209
Individualism approach 181 Online study resources 209
Moral rights approach 182 CourseMate Express for Management 209
Justice approach 182 Search Me! Management 209
Practical approach 182 Response to the management challenge 209
Monsanto's ethical challenges 209
4.4 THE INDIVIDUAL MANAGER AND ETHICAL CHOICES 183 Discussion questions 210
Givers versus takers 186 Ethical challenge 211
4.5 WHAT IS CORPORATE SOCIAL RESPONSIBILITY?- - -188 What is right? 211
Organisational stakeholders 188 Group challenge 212
Ethics and business costs 212
4.6 THE GREEN MOVEMENT 193
Sustainability and the triple bottom line 193 Case for critical analysis 212
Too much intelligence? 212
4.7 EVALUATING CORPORATE SOCIAL RESPONSIBILITY 196 On the job video case 213
4.8 MANAGING COMPANY ETHICS Theo Chocolate: managing ethics
AND SOCIAL RESPONSIBILITY 198 and social responsibility 213
Code of ethics 200 CHAPTER CASE STUDIES
Ethical structures 201
A leadership dilemma at Timberland 194
Whistleblowing 202
A crisis to milk 202

CONTENTS
 PART THREE PLANNING

CHAPTER 5 ORGANISATIONAL PLANNING AND GOAL SETTING ------------------ 218

5.1 GOALS, PLANS AND PERFORMANCE 221 STUDY TOOLS 251
Messages and values contained
Online study resources 251
in goals and plans 223 CourseMate Express for Management 251
5.2 GOALS IN ORGANISATIONS 225 Search Me! Management 251
Organisational mission 225 Response to the management challenge 251
Goals and plans 226 Well-laid plans and their vulnerability to
Aligning goals with strategy maps 229 external forces 251
Discussion questions 252
5.3 OPERATIONAL PLANNING 231
Ethical challenge 252
Criteria for effective goals 231 Inspire Learning Corporation 252
Management by objectives 234 Group challenge 253
Single-use and standing plans 238 Course goal setting 253
5.4 BENEFITS AND LIMITATIONS OF PLANNING 239 Case for critical analysis 253
Central City Museum 253
5.5 PLANNING IN A TURBULENT ENVIRONMENT 241
Contingency plans 241 On the job video case 254
Mi Ola swimwear: Managerial planning
Scenario planning 242 and goal setting 254
5.6 CRISIS PLANNING 243
CHAPTER CASE STUDIES
Pre-event 244
Response and recovery 245 Planning and implementing the infrastructure
Post-event 245 of the future 233
Siem ens 235
5.7 INNOVATIVE APPROACHES TO PLANNING 247
Set stretch goals for excellence 247

CHAPTER 6 STRATEGY FORMULATION AND IMPLEMENTATION ------- - - - ---- ---- 258

6.1 THINKING STRATEGICALLY 261 6.8 STRATEGY IMPLEMENTATION 291
What is strategic management? 262 Implementing global strategies 293
Purpose of strategy 262 Testing the quality of strategy 294
Levels of strategy 266
STUDY TOOLS 296
6.2 THE STRATEGIC MANAGEMENT PROCESS 269 Online study resources 296
Strategy formulation versus implementation 272 CourseMate Express for Management 296
SWOT analysis 272 Search Me! Management 296
6.3 FORMULATING CORPORATE-LEVEL STRATEGY 275 Response to the management challenge 296
The portfolio strategy 275 Netflix: Proof that companies need to adapt, or fail 296
The BCG matrix 276 Discussion questions 297
Diversification strategy 277 Ethical challenge 298
A great deal for whom? 298
6.4 FORMULATING BUSINESS-LEVEL STRATEGY 279
Group challenge 298
Porter's competitive forces and strategies 279 Developing strategy for a small business 298
6.5 FORMULATING FUNCTIONAL-LEVEL STRATEGY 283 Case for critical analysis 299
6.6 NEW TRENDS IN STRATEGY 284 Costco: a different approach 299
Innovation from within 284 On the job video case 300
Theo Chocolate: strategy formulation and execution 300
Strategic partnerships 285
6 .7 GLOBAL STRATEGY 287 CHAPTER CASE STUDIES
Globalisation strategy 288 MYOB 265
Multidomestic strategy 289 Apple Inc. 's strategy: much more than iPod, iPhone,
Transnational strategy 289 iPad and M ac 267
 APPENDIX TO CHAPTER 6 MANAGERIAL DECISION MA Kl NG ____________________ 302
A6.1 TYPES OF DECISIONS AND PROBLEMS 304 A6.4 WHY DO MANAGERS MAKE POOR JUDGEMENTS? - -320
Prog rammed and non-programmed decisions 304 Innovative decisio n making 321
Facing uncertainty and ambiguity 305 St art w it h brainst o rming 321
A6.2 DECISION-MAKING MODELS 308 Use hard evidence 322
The classical model: rational Engage in rigorous debat e 323
decision making 308 Avo id groupthink 324
How managers actually make decisio ns 309 Know w hen to pull the plug 324
The political model 3 11 Do a postmortem 324

A6.3 DECISION-MAKING STEPS 313 STUDY TOOLS 326

Recognition of decision requirement 313 Online study resources 326
Diagnosis and analysis of causes 314 CourseMate Express for Management 326
Development of alternatives 31 5 Search Me! Management 326
Selection of desired alternative 316 Discussion questions 326
Implementation of chosen alternative 317 PART 3 CONTINUING CASE: PLANNING AND
Evaluation and f eedback 3 17 ORGANISING THE TRANSITION AT TOYOTA
Personal decision framework 317 AUSTRALIA 329

PART FOUR ORGANISING ________________________________________ 331

CHAPTER 7 DESIGNING ORGANISATION STRUCTURE _________________________ _ 334

7.1 ORGANISING THE VERTICAL STRUCTURE 337 7.6 FACTORS SHAPING STRUCTURE _ _ _ _ _ _ _ _367
Work specialisation 338 Structure follows strat egy 368
Chain of command 339 Structure fit s the technology 369
Authority, responsibility and delegation 339
STUDY TOOLS 373
Span of management 342
O nline study reso urces 373
Cent ralisatio n and decentralisation 344
CourseMate Express for Management 373
7.2 DEPARTMENTALI SATION 346 Search Me! Management 373
Vertical f unctio nal approach 347 Response to t he management challenge 373
Divisional approach 350 Unlocking the value of strategic alliances: Renault and Nissan 373
7.3 MATRIX APPROACH 353 Discussio n questio ns 375
How it works 353 Ethical challenge 375
A matter of delegation 375
7.4 TEAM -BASED APPROACH 356
Group challenge 376
How it w orks 356 376
Family business
Virtual net work approach 358 Case for critical analysis 376
7.5 ORGANISING FOR HORIZONTAL Coles 376
COORDINATION 363 On the j o b video case 377
The need for coordination 363 Honest Tea: Designing organisation structure 377
Task forces, t eams and project management 365
CHAPTER CASE STUDY
Relatio nal coordination 366
Strida Bicycles: a globally networked company 361

CHAPTER 8 MANAGING CHANGE AND INNOVATION __________________________ _ 380

8.1 INNOVATION AND THE CHANGING 8.2 CHANGING THINGS: NEW PRODUCTS
WOR KPLACE _ _ _ _ _ _ _ _ _ _ _ _383 AND TECHNOLOGIES _ _ _ _ _ _ _ _ _ _387
W hy do people resist change? 384 Exploratio n 387
Disrupt ive innovatio n 385
The ambidext rous approach 386

CONTENTS
8.3 COOPERATION 392 Response to the management challenge 413
Innovation roles 396 Reinventing Samsung 413
8.4 CHANGING PEOPLE AND CULTURE 399 Discussion questions 414
Ethical challenge 415
Training and development 401
Crowdsourcing 415
Organisation development 401
Group challenge 416
8.5 IMPLEMENTING CHANGE 405 Are you ready to implement personal change? 416
Creating a sense of urgency 406 Case for critical analysis 417
Resistance to change 407 Malard Manufacturing Company 417
Use implementation tactics 408 On the job video case 417
Honest Tea: Managing change and innovation 417
STUDY TOOLS 413
Online study resources 413 CHAPTER CASE STUDIES
CourseMate Express for Management 413
386
Building a better mouse .
Search Me! Management 413
General Electric 400
A mini crisis of culture and performance 410

CHAPTER 9 MAN AG ING HUM AN RESOURCES -------------------------------- 42 0

9.1 THE STRATEGIC ROLE OF HRM IS TO DRIVE STUDY TOOLS 455
ORGANISATIONAL PERFORMANCE 423
Online study resources 455
The strategic approach 424
CourseMate Express for Management 455
Building human capital to drive performance 425
Search Me! Management 455
9.2 THE CHANGING NATURE OF CAREERS 427 Response to the management challenge 455
The changing social contract 427 HRM as a vehicle for understanding cultural differences 455
Innovations in HRM 428 Discussion questions 456
9.3 FINDING THE RIGHT PEOPLE 431 Ethical challenge 457
Human resource planning 432 Roles and responsibilities 457
Selecting 436 Group challenge 458
Management competencies 458
9.4 DEVELOPING TALENT 441 Case for critical analysis 458
Training and development 441 The right way with employees? 458
Performance appraisal 445 On the job video case 459
9 .5 MAINTAINING AN EFFECTIVE WORKFORCE 449 Barcelona Restaurant Group: managing human resources 459
Compensation 449
CHAPTER CASE STUDIES
Benefits 451
Rightsizing the organisation 451 Container Store 435
Termination 452 VIVO Cafe: all in the family .. . the business is people 448
Biotechnology companies in turbulent
environments and challenging times 453

PART FIVE LE AD ING -------------------------------------------- 463

CHAPTER 10 LEADERSHIP -------------------- ----------------------------- 464

10.1 THE NATURE OF LEADERSHIP 467 Authentic leadership 472
Bossless does not mean leaderless 468 Gender differences 473
10.2 CONTEMPORARY LEADERSHIP 469 10.3 FROM MANAGEMENT TO LEADERSHIP 475
Level 5 leadership 469 Leadership traits 476
Servant leadership 471
 Behavioural approaches 477 STUDY TOOLS 500
The Leadership Grid 478 Online study resources 500
10.4 CONTINGENCY APPROACHES 480 CourseMate Express for Management 500
The situational model of leadership 480 Search Me! Management 500
Fiedler's contingency theory 482 Response to the management challenge 500
Leading a revitalisation 500
10.5 SITUATIONAL SUBSTITUTES FOR LEADERSHIP 485
Discussion questions 501
10.6 CHARISMATIC AND TRANSFORMATIONAL LEADERSHIP_488 Ethical challenge 502
Charismatic leadership 488 Does wage reform start at the top? 502
Transformational versus transactional leadership 490 Group challenge 502
10.7 FOLLOWERSHIP 492 Which leadership styles are more effective> 502
Case for critical analysis 503
10.8 POWER AND INFLUENCE 494 DGL International 503
'Hard' position power 494 On the job video case 503
Personal 'soft' power 495 Camp Bow Wow: Leadership 503
Other sources of power 496
Interpersonal influence tactics 497 CHAPTER CASE STUDY
News Corporation 479

CHAPTER 11 MOTIVATING EMPLOYEES 506

11 . 1 INDIVIDUAL NEEDS AND MOTIVATION 511 Giving meaning to work through engagement 539
Intrinsic and extrinsic rewards 511 Keeping staff motivated in Australia
Managers as motivators 514 and New Zealand 541
Motivating in a bossless environment 514
STUDY TOOLS 543
11.2 CONTENT PERSPECTIVES ON MOTIVATION 515
Online study resources 543
The hierarchy of needs 515 CourseMate Express for Management 543
ERG theory 519 Search Me! Management 543
A two-factor approach to motivation 520 Response to the management challenge 543
Acquired needs 522 Sandstrom Products: motivating employees 543
11 .3 PROCESS PERSPECTIVES ON MOTIVATION 524 Discussion questions 544
Goal setting 524 Ethical challenge 545
Equity theory 526 Compensation showdown 545
Expectancy theory 527 Group challenge 545
Should, need, like, love 545
11.4 REINFORCEMENT PERSPECTIVE
Case for critical analysis 546
ON MOTIVATION 530
Lauren's balancing act 546
Direct reinforcement 530
On the job video case 547
Social learning theory 532
Mike Boyle Strength and Conditioning:
11.5 JOB DESIGN FOR MOTIVATION 534 Motivating employees 547
Job enrichment 534
CHAPTER CASE STUDIES
Job characteristics model 535
Managing motivation at Degussa Peroxide Ltd 510
11.6 INNOVATIVE IDEAS FOR MOTIVATING 537
Nintendo Wii U: coping with fierce competition
Building a thriving workforce 538 in the world's video game market 517
Empowering people to meet higher needs 538 Outback Steakhouse 523

CHAPTER 12 COMMUNICATION IN ORGANISATIONS ____________________________ 550

12.1 COMMUNICATION IS THE MANAGER'S JOB 553 Communicating to persuade
What is communication? 555 and influence others 563
A model of communication 555 Communicating with candour 564
12.2 COMMUNICATING AMONG PEOPLE 557 Asking questions 566
Open communication climate 558 Listening 567
Communication channels 560 Non-verbal communication 569

CONTENTS
12.3 ORGANISATIONAL AND WORKPLACE COMMUNICATION - -570 Ethical challenge 587
Social media 571 The voice of authority 587
Personal communication channels 572 Group challenge 587
Formal communication channels 576 Listen like a professional 587
Crisis communication 580 Case for critical analysis 588
WA Manufacturing 588
STUDY TOOLS 585 On the job video case 589
Online study resources 585 lntermountain Healthcare: Managing communication 589
CourseMate Express for Management 585
Search Me! Management 585 CHAPTER CASE STUDIES
Response to the management challenge 585 Genera/ Electric 564
John Mcfarlane: communicate to build morale 585 Susan Williams 579
Discussion questions 586

CHAPTER 13 LEADING TEAMS ---------------------------------------------- 592

13.1 THE VALUE OF TEAMS 596 STUDY TOOLS 623
What is a team? 596
Online study resources 623
Contributions of teams 597
CourseMate Express for Management 623
13.2 TYPES OF TEAMS 599 Search Me! Management 623
Functional teams 599 Response to the management challenge 623
Cross-functional teams 599 NEC in Mulgrave: teams that work 623
Self-managed teams 600 Discussion questions 624
Virtual teams 601 Ethical challenge 624
Consumer safety or team commitment? 624
13.3 THE DILEMMA OF TEAMS 605
Group challenge 625
13.4 MODEL OF TEAM EFFECTIVENESS 607 Feedback exercise 625
13.5 TEAM CHARACTERISTICS 609 Case for critical analysis 625
Size 609 Are we a team? 625
Diversity 609 On the job video case 626
Member roles 610 Tough Mudder: Leading teams 626

13.6 TEAM PROCESSES 612 PART 5 CONTINUING CASE: TOYOTA'S

Stages of team development 612
BEHAVIOUR AND TEAMWORK 629
Team cohesiveness 614 CHAPTER CASE STUDIES
Team norms 615
The team's the thing 596
13.7 MANAGING TEAM CONFLICT 617 The Aconex team in Melbourne 604
Types of conflict 617 Espresso 611
Balancing conflict and cooperation 617
Causes of conflict 618
Styles to hand le conflict 618
Negotiation 620

PART SIX CONTROLLING 631

CHAPTER 14 MAN AG ER IAL AN D QUA LI TY CONTROL ____________________________ 634

14.1 THE MEANING OF CONTROL _ _ _ _ _ _ _ _ _ 637 14.3 BUDGETARY CONTROL._ _ _ _ _ _ _ _ _ _ _644

14.2 FEEDBACK CONTROL MODEL 638 Expense budget 645

Steps of feedback control 639 Revenue budget 645
The balanced scorecard 642 Cash budget 645
 Capital budget 646 STUDY TOOLS 667
Zero-based budget 646 Online study resources 667
19.4 FINANCIAL CONTROL 647 CourseMate Express for management 667
Financial statements 647 Search Me! Management 667
Financial analysis: interpreting the numbers 650 Response to the management challenge 667
Controlling an empire at Dell 667
14.5 THE CHANGING PHILOSOPHY
Discussion questions 668
OF CONTROL 652
Ethical challenge 669
Hierarchical versus decentralised approaches 652
The wages of sin? 669
Open-book management 655
Group challenge 670
14.6 TOTAL QUALITY MANAGEMENT (TUM) 657 Create a group control system 670
TOM techniques 658 Case for critical analysis 670
TOM success factors 661 Lincoln Electric 670
14.7 TRENDS IN QUALITY AND FINANCIAL On the job video case 671
CONTROL 663 Barcelona Restaurant Group: managing quality
and performance 671
International quality standards 663
Corporate governance 663 CHAPTER CASE STUDIES
14.8 QUALITIES OF EFFECTIVE CONTROL Semco's open-book policy 656
SYSTEMS 665 A lesson in quality from China 658
The honeybee style 660

CAPSTONE CHAPTER MAKING EFFECTIVE MANAGEMENT HAPPEN ________________ 674

C.1 FUNDAMENTAL PRACTICES COMMON TO WINNING STUDY TOOLS 699
ORGANISATIONS 678
Online study resources 699
Leadership practices 678
CourseMate Express for Management 699
People management practices 683 Search Me! Management 699
Customer focus practices 687
Discussion questions 699
Quality management practices 688 Group challenge 700
Innovation practices 690 Understanding how an organisation works 700
Knowledge management practices 691
CHAPTER CASE STUDIES
C.2 DEEPER PRINCIPLES COMMON TO THE
WORLD'S BEST ORGANISATIONS 693 'Heartfelt Leadership' pays off at Toyota 681
C.3 PUTTING IT ALL TOGETHER: Google (Alphabet Inc.) : a great place to
THE ORGANISATION AS A SYSTEM 696 search - and work 686
Values can come from Mars 696

Glossary 701
Name index 711
Subject index 716

CONTENTS
 Guide to the text
As you read this text you will find a number of features in every chapter to
enhance your study of management and help you understand how the theory
is applied in the real world.

I PARTTWD I PART-OPENING FEATURES

THE ENVIRO NM EN T
OF MANAG EMENT

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 FEATURES WITHIN CHAPTERS

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and 11\e early human rehltio115 assumptions about human behmwur. Ba§('a on ht5 l'XJlffl'-"'Ces as a
manager and coll5ultant, h,s tTJ1ning as a psycholog,st ,md the work of Maslow, McGregor {o.,nulatcd
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tti e icon directs you to tli e relevant mate r.ial.
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a riew aprroach OC'gms with a shift to dec•ntral!Md pi.nmne, wh,ch meaos th.:tt pL:mn,og Cl,:perts WOO
thL~r - eno .. JlNd
\\1th managers in major d11"is,ons or dq1,1nmcnts to dt.'\'i'lop own go.115 and p lans as is mdicatt>d in
UIHIIIT 1.a. /1.!anagcr.; throughout the company come up Mth their mm crNUw soluhons to problems
and become rnoR'romm,u!.'d 10 following through on th,, pbns. As 1h,, cn,ironmenl becomes 1-"1'-'fl more
~·-·-
ploM!t19

plo'lnr,ge.pen,ID~
"""'"""'""""V<'""'"-
1"olat1le, 1opexecutn-...sseetheb.."'1ldiisofpushingdecemralb;edpl.,nnini;"'"nfurthcr byh.a1"ingp!am1ing
experts work d,R'ctly "1th line managers a!ld front-line c,nployces to dcwlop dynamic pLms that meet
fast-changingn<'Cds,.
ln a complex and CO!np,.'titiw business l'IWironml!fll, s!Tategit thinking and exc.."tJtion be.:ome the
expectatlOllof l-"l-,,,Yl'lnplo)l'-'<'." rlanniogroines a.h,'i'whl'lll'lnployt-"-"'aremvolved,n..,tunggoals aod
detenntning the means tn R'a,h th,,m. Thr following J;eC!i,">11'; pl'Olide sotnc guiJelines for lll!lO\'J.tiW
planmng.

xvi GUIDE TD THE TEXT

 INNOVATIVE WAY
COSTCO'S WINNING FORMULA
Cosico Wkolesale Corporation, a no- frills, '!elf-service r;uslomerbasebydelvingfurtherlntotheAs.ianmarlc:ets,
warehousedub.operatesanintematlonalchainof whereconsumerspendlngandgrowttiishigherthan
membership wareho~es offering a limited selection of matu1eUnltedStatesandEuropean marlcets. Costco's

Gain an understanding of productsalreducedprices.Costco'sbusinessmodelfow~ complexenvifonmentlsll!ustrated ln lilfHIIIITl.2.Ccxlco"s

companies and managers at the
forefront of innovation in the field
of contemporary management
practice in both an Australian
oomaintainingitsimagea.sapricing authority,consistently biggl'st competitive advantage i'l ill workfmce. 'Costco
providing!helll()';tcompetitrveprices. ·tverythingwe compensates employeesverywell.wellabovetheindustry
doistop1ovidegoodsandservicestothecustomerata mtermsofwagesandbeneflts.'says R.J. Hottovey.aretail
lowerprice.'sa.idJimSlnegal,CEOandfounder.Costco analystat Morningstar.'When,etailersarecuttinghealth
warehOUse'laredesigned looperateefficientlyandto
communicate value to membef"'i. The warehouse decor -
benefits. Costco employees don't have to wony about that.'
hes.ays. ThehappinessandmoraJeof employee,;isoflen
highceilings.metalroofs.exposed trusses-keepscosls
lowandcontributestotheperceptionthalCostcotsfor
over1ookedin the retail industry, but not at Costco. Thanks
toltsgoodlreatmentofwCNkei-s.Costcohuooeofthe
seriousshoppersseekingseriousbargains. Otherstlategies lowestturnoversinthe retailindustry (onlysixpercenO,
for keeping prices low !ndude offering only 3600 unique anditearnsUS$530000ofrevenue?fremployee.Costco
products at a time and negotiating low prices with supplier5 hassuccesslullyopenedstCHesinAustralia andisplanning

and global conte xt from the Only about a quarter of sales come from outside the United morethantheeightmajorstoresit hadln2016,duetothe
States.butstoresalesinoverseumarkets-includ1ng greatsuccessilhuachievedinMelbourneandSydney.

Innovative way boxes. Australia - have been growing about four times faster
than those in the United State'!. Ccxko plans toe~pand Its
Costco has entered the petrol ,et.ailing market in AudraJia In
lh1eestales.
Soutea:Edebo11.S.l)OJ•...,•'1'2011l. Cco1COl(eepsfa!ffll.Jl• u hE"P1ndo.l'ltl"""'•1-1tt1rOoily.19,1;°'"'!1,A. !lA,p,112010~CoolCOC--
Marliet. n.. w.n SlrHI Joun>I( 85: Ind Fatm 10.K lot CoslooWh- . i . Co,potallon, IMm 7 - M1nogemenfi Olsa,. .lon and"1lalysilo1 ANrdll
Condhlanstndl\Muhao!Ope,-adono., Couco........,,,1/l,opon.~l!Jdl'M'W.....gowAn:11Jvealedgaefao~119J12Snn1au..\:!203874a10k.
htmftoc203l04_9jta:o-10Juty20\2~

INNOVATIVE WAY
Twitter and square Ch 01, p. 6 Procter & Ga mble Ch 08, p. 396
Budget blockbusters Ch 01, p. 16 General Electric's work out Ch 08, p. 404
Clickcorp: Taking Ugg to the world Ch 01, p. 35 Staying in the picture: Ted's cameras Ch 08, p. 406
Shopping online, even for cars Ch 02, p. 95 ENSR Ch 08, p. 409
Costco's winning formula Ch 02, p. 100 Ang lo American pie. Ch 09, p. 424
Zappos family Ch 02, p. 111 Taj Mahal Palace, Mumbai Ch 09, p. 442
Hollywood studios Ch 03, p. 146 Level 5 leadership at work Ch 10, p. 470
Gap Inc Ch 04, p. 189 Charismatic leadership Ch 10, p. 488
Cultivating a service mindset Ch 04, p. 199 Flexible work policies Ch 11, p. 520
Goog le Ch 04, p. 200 Prudential UK and Europe Ch 11, p. 540
Planning for a bigger Toll Ch 05, p. 240 Virtual brainstorming Ch 12, p. 562
Jetblue Ch 05, p. 246 Cisco systems Ch 12, p. 567
The birth of the Kindle Ch 05, p. 248 Amgen Inc. Ch 12, p. 568
Amazon Prime Ch 06, p. 266 Tupperware Nordic Ch 12, p. 572
Dell Technologies Ch 06, p. 271 Spring company Ch 13, p. 603
Facebook Ch 06, p. 274 McDevitt Street Bevis Ch 13, p. 619
Focused innovation in marketing Ch 06, p. 285 7-Eleven Ch 14, p. 649
The Dodo is not extinct ! Ch 06, p. 290 Campbell soup Ch 14, p. 654
Caterpillar Ch 07, p. 340 The global success of eBay Ch 14, p. 662
Teams work at Imagina tion ltd. Ch 07, p. 357 GE people/ talent management Capstone Ch, p. 685
Flight coordination Ch 07, p. 366

GUIDE TD TH E TE XT xvii
 CASE STUDIES
Growing a business From scratch: lavender! Ch 02, p. 99
Green power Ch 02, p. 112 Obtain an understanding
McDonald's Ch02~
of how leading practitioners
The axis of India Ch 03, p. 138
A leadership dilemma at Tim berland Ch 04, p. 194 are applying management
A crisis to milk Ch 04, p. 202 theory from the real-world
Planning and implementing the infrastructure of the
Ch 05, p. 233 examples in the Case study
Future
Siemens Ch 05, p. 235
boxes.
MYDB Ch 06, p. 265
Apple lnc.'s strategy: much more than iPod, iPhone, iPad
Ch 06, p. 267
and Mac
Strida Bicycles: a globally networked company Ch 07, p. 361
Bu ilding a better mouse . Ch 08, p. 386 CASE STUDY
General Electric Ch 08, p. 400 ~

A mini crisis of cu lture and performance
Container Store
VIVO Ca fe: all in the family ... the business is people
Ch 08, p. 410 R1y Kroc, founder of Mt0o~·s. once s11d. ·1 dorn lmow
what we·1 be serving In the ye:u 2000. but we·n be ser,n1,1
more o f It than mybody'. Fmm Its founding through to trn,
Ch 09, p. 435 ~ 1980S, Mdlonul's dunged with consumer,' 1.:1:stes
~ n g to~ ti< what we w:inted befo,e we ,:vcn k =
Ch 09, p. 448 we wanted !L Today, however. Kroc's bold cblm does not
seem so :mured. Although Mo:Donild's s~~ h:is 1 m2jority
divided the United St:Un Into temtorle'I. cre1Ung smal~
comp.anle!. to reapture some of MCDorukrs entrep1eneurbl
1e2l. We ve not afraid to do thing, ditft'fffltly.' Grttflbng
Uld. Mm:tgers began to ~gnkc that, rven !h<)Ugh
McDon;>Jd', w.:,,; stlll thc world's most wccasfl.l rest..urmt
comp.liny. It was far from achieving ltspolentlal. They were
trying to retum MtDon~·s to the healthy. adaptive culture

Biotechnology companies in turbulent environments and
challenging times
News Corporation
Managing motivation at Degussa Peroxide Ltd
Nintendo Wii U: coping with fi erce competition in the
world's video game market
share of th<- US fffl·food mvket md continues lo exp21ld
Ch 09, p. 453 lnk'm:!tlon:111)',thccompanytsslppingf.:a,t lnlts obiltyto
recognlSf ond slul'(' pop,Jlor tttnd<
Sorneanalysu:ind ln'll'S~belevethewklespreod
problemsw;thMcDonold's:ueduetothecomp:iny'sinsubr
Ch 10, p. 479 arrogant cUltUfC. The •~roge top e,cecuttve al MCOonokh
startcdworklng attherornp:mywhrnRkh:ird Nm>nwas
Ch 11, p. 510 l'fesjdentoltheUnltedStates,andthecompanyhasb«n
reluct:mttobrlnglnoulsidelea6erstoguide=n•gementas
the e~te=I environment ch:utges. kid ttle ~rd is =de
Ch 11, p. 517 upof~-knitlnslde"whah.av.,donellttletoaglbkl0<
change . "' perlormance d«HnNI. top leaders ten<led to
blamrtothets,1ucha1 dl1sklentfranch""°' · ~ws"'porters
of the earfy y,,=. when It w:os rnmbntly in touch with the
By the late 2000., Md)onald's hod mode m:my changes,
wosoperatlngmoreeffldently ondsusulnoblyondoffeilng
newproductssuchasWdsondcafo!p(odUCU. ltlnc~ased
ulcl XJCM Its 35000 ~ . ol)vloo.ly giving It< 60 millon
<1Jrtorne,,;perdayanexl)Cflcnceth.attheyvaJue,whtJ,,.:ilso
WICfeaW!gth<:<ompmys1toc:k?OCebyaf:tcto,of thrtt
OYCfth<:flveycarsto2007.Growthlneme!'gingeconomles
has beffl very soHd M<:Don:Jd's has more rett!ltly
rf'lurl>ishedft> st0<es andrNC\lgncdlt.product, lnlcadlng
m2fltets such:,,; Austr.:ilia.. now makOlg =ny product. to
thcsptdflc0<de"oflt1cu,tome".lly2014,Mc0orwd's

Outback Steakhouse Ch 11, p. 523 and Wall Strttt analysts. 'If the~ we~ one thing I would
change about McDonald's,' ~id stnlor vke·pl'COOent Brod
h.ld subst-anlWjy w:ompllshcd this product and process
u p ~ through rolling It out on an h1temallonol basis, N,
A. BaJJ. 'it would be to correct the m1,amceptK>OI and of 2016. McDonald's has engaged Tn signil!cant lnnovatlons,
General Electric Ch 12, p. 564 rnisperceptlon,th:>1.hove~sopetv~lvt,fnthela5l frorn·c,eateVourTaste'tobble "1vlu-option,2rnla
few yem: range of new "'tvkes and lnitlatl11es McO.fe's, which are an
Susan Williams Ch 12, p. 579 lnthcl:lle1990s, McDon:lld's emb.ukedonaneffortto Ausb"aUanlnnovatlonlor,V,c:Donald's,h.avebttn rolledout
~ form. ~~ement was reorganMd. and tile then·hcad of Olte=tiorlally These new 5CJVlces have led to slgnlfk:tnl
The team's the thing Ch 13, p. 596 th<:USdornesticdlvlslon.JadM. Grttnberg, brought!nol
le2'!. a h>ndfut of new m>.n>.ger1. Including e•«utlvn from
sales growth. andh1vc.,...enbrooghtnewcustomfflto
rnnS1Jme from Ml:Dorwd's
eu,gerKh1g, Boston/iiwketandGener.:ilE!m:rlt..He.:il~
The Aconex team in Melbourne Ch 13, p. 604 Foodl,,,ll,oUS......-.--.---....-
Sou>ooo, f.......,.,... 1-iso,,,.........20131,Coumn,Aopo,tf...
_ , _ _ 20,ti-.a.dt..O.tt Mot<II IMllMcO....oklO:C..,~~ .. Goi...louct,!s...i.-W...,111-1

Espresso Ch 13, p. 611

Semco's open-book policy Ch 14, p. 656
A lesson in quality from China Ch 14, p. 658
The honeybee style Ch 14, p. 660
Capstone Ch,
'Heartfelt Leadership' pays off at Toyota
p. 682
Capstone Ch,
Google (Alphabet Inc.): a great place to search - and work
p.686
Capstone Ch,
Values can come from Mars
p. 696

xviii GUID E TD TH E TE XT
 AUSTRALIAN MANAGER
PROFILES
l ustin Ryan, Head of log1st1cs
..
r-iiiiiii"~~~~~~i ~!~~~ti:m:11howcleverwe'dbe<tn-SQcl11arly1here
www.lonelyplanet.com, has becom11 a gathering
pointforglobal travellers,and thebus,nessis
nowamaturesuccessstory
Fromitshumb!11ori9ins, Lon11lyPlanet
becametl\ei>Cknowledgedleaderlntravel
publlcations.tnpubllshlng,yoopayfor
everythinguplront-shipping,printingand
rnsearch.Th11re is II w11it of momhs for II return
on ir,vll'Stm11nt. Th1tWh1H1l1trs' op11ra1ion grew
ffomado-it-yoorselfbusin1111stoaglob11I
e,,terprise,withatonepolntover450!i!atl
M AUREEN worklngaroundthllworldand 200authors
contributing.lon11lyPlan111productshava
AND T ONY
expandedtoincludephras&books,travelmapa,
WHEELER,
pictorials, t•avelliteratureand reference books
c o . FOUNDERS,
Thewebsitereceivesmllllonsofv,sitorsper
LONELY monthandltsaciiveThornTreelorumrecelves
P LANET 100000 new posts each month. Tha books are
PUBLICATIONS
now •old In ma ny language5 Including French.
ltalian,Spanish,German,Chlnese,Koraanand
Japanese.
In relle<:tlng on Iha company's early life,
Tony Wheeler says: 'When Maurean and I ptH
togeth11rAcrossAsiaon1heCh9ap-1ha1flrs1
amateurishly produced guidebook !o kicking
a,ound Asia - we had no Idea we were at.ailing
on tha long road to running an amazingly
successfulbusiness.firstofall,wehadavery
goodldaa.Ofcourse,wedidn't realiseattha
&OUIICES...,_.,.Pr_ _ _ hltp~.- ~ n , i - ! 1 - 2 0 \ ) l; - . . . ,. Ml21fom.,"'l'20!1!
IIBCtolkly-rhll-!<>!L<>noly"-*.~!tp~.'WWW,,_.com..........,ol--.to·buy-t~-~==:~°!!"!~~~
XX GUIDE TD THE TEXT
was a major tilement of lut* in !hat good idea
Secondly.oncewe'dhadthatgoodldaawe
ran with ii lor a ll we were worth; the 1 per cfml
inapir.uionwasdefinl1elylollowedby1he99por
e11nt parsp1ration. Ther1, when our dream began
totakewing, wehaven'tbeeoafraidtoletother
people take the controls; In feet we've welcomed
thatbecau~flyingisn'tallfunandl'monlytoo
heppytoascapefromtheroutine.
'Waybad<downth11evohnlonary scaleyou
canforgetihellttledetllils.Wlllltfly orisil
goingtocrashi1alltha1mana.a. l'venava1been
afraidtohaveag<ralthings;ifltwassomethlng
that I felt was going to work we'd try ii. Gut
feelinghasalwayabeanjumasimponantas
carefulanalys1s."
In 1984,lonelyPlanetopenedit1USotfice.
lnth11lat11 1980s,itopened11noffic11inEngland
servlngAhka,Europe,th11Middl11Eastand
!nlate2007,theWheelerssoldamajorlty
lntere!i!lnthelonelyPlanetbus!nesstoBBC
Worldwide, th11 main comme,cial arm of the
British Broadcasting Corporation {BBC). Tha
company has moved forward and am braced
digitalmedia,continuing1oleadltslndus11y.
In 2011 BBC Worldwide took total control of
the company when thll Wheelars sold their
ramaining 25 per cent share for $67 million.
BothMaor9tln andTony5tilltrave1anda,e
concerned with charitable causes. Their Planet
Wheeler Foundation, which Is funded solely
by the two of them, suppolls educational and
heatlhprojectslndevelopingcountrlea.
Meet real Australian managers in
the Australian manager profiles
and gain an insight into some of
the organisation challenges that
Australian managers have had to
overcome in their careers.
TheAntarcticwlnterlsharsh - temperatu; ,~~-
hovararound minl.Js35degreasCelsius, the"~
areconstantbliuards,monthsofdarkness.
andyoucan'tgetinoroutoftheplace.Work
becomestediousandyouknow1hatnothing
w!llchangeuntiltheresupplyshiparrlves,a
distllntninemonthsaway.
lt soundsextreme.Buttheraalityisevery
wotkpl&eehasanAnta,cticwintar. Every
business has a p,eriod of tima where the work
slows down and wo,k is juM work.Threa too!s
keptmyteaminspired,motivatedandresilient
through1helongAntarcticwln1er.
+ Notriangles.Thepracticeofonlyhav/ng
directconversalionsbuiltrespectwithlnmy
111amand1esulrndinveryhlghperformanc11.
Wehad 1simpter11le:'l don'tspeaktoyou
ebouthim,oryoudon'tspeak tomeabout
her'.Notria..gles;godirecttothesource. tt
isapowerfultooltha!reducasconflictand
clarifiesaccountability. lt e naurasyoudeal
with the Important \ssues and avoid wasted
tlmehandllngpersonafdl1putesthatsimply
burn energy.
+ Man.ageyourhac:<>nwanr. Amajor d ispu!e
oncethreatenedtoshutdownthest.auon;
Shouldthebaconbesoflor crispy?Yoo•
workplacewillhaveBaconWars.Theyar•
seeminglysmall,irTelevant fssues that
gralll on people but build up until they
becomedistractions a ndaffectprodu~ivity.
ltmaybedlnycoffeecups,peoplawhoare
SOlll!a'. --nsonlMBA.Mell>oumol. ...._.p,o!.....ror..i _ _
: ~~ ; ; ;~ ~ ~ ~ ~ ; -" " i i i i i 1 l
lafl a ndigflOred,smallproblamswil!faster
andundarminea1!1hegoodth1ngayouare
doing.
+ Respect trump• harmony. My axpedition
team was the most divarse taam I had
ever worked with. I didn't recruit them. I
was handed them. We were from vastly RACHAEL
differentbad<groundsandemixol ROBERTSON:
prof ,s"ons "nclud"ngsc"11nfs1s,eng"neers, LEADERSHIP
IT,rrades,pilotsandweatharspecia!ists.
LESSONS FROM
The interpersonalpressurewaain111nseand
privecywass.carce.ltwasimpracticaltoth,nk
THE WORLD'S
TOUGHEST
w.:i"dallgetalongwitheachother allthe
uma.lnstead ol 'happyfamilies', waaimed WORKPLACE
lorrespa,:t.Simple,profeasionalcounesy
andr1111pect.
S1rivingforaharmon!ouswo1kplaceis
dangerousfortworl!llsons. First,dysfunctlonal
behaviou1doesn'1dis.appear,i1jus1goes
undarground, so thll llluslon of ha,mony
remalni.Second, itstifles!nnovation. People
areoftentooafraidtoputuplheirhandand
offe,adiffarentviewbecausetheydon'twant
lo rod< the harmony boat. So, in your taam, aim
forrespect,because'respecttrumpsharmony',
every time.
onc1.,..,,,.,,
 lir.==================fNM
f"=========fM
Analyse practical applications
of management concepts in the
Management in practice boxes
which highlight specific aspects of
management and offer in-depth,
practical advice about how to
address them in a work context.
'. .
if1me management t1 s F
I 1• • .,·
,.
Management tools and trends
Unlocking innovative solutions through
power (and respons1b1l1ty) to the people
....
... ..
Challenging the boss on ethical issues
Who sets the goals? Manager versus coalition
..........
Evidence-based management
~ANAGEMENTINPRACTITl~CE"::::::=:=:=:=:=:::=;i~
GUIDELINES FOR ETHICAL DECISION MAKING
If a 60 Mlnuln crew wH .,.....;,ing on your doorstep one
morning, would you fee1 comfortable Justifying your actions
to the came1a7 One young manage,. when confronted with
ethieal dl!emmu, gives them the '60 Minutes test'. Others
$11y They use sud! crl1eria as whather they would be proud
1otelltheirpa<entsorgrandl),lllrenta1bouttheud111:ision,or
whether1heycouldsleepwell11n\ghtendfacethemsetves in
the mirror In the morning. Managers often rely on th&fr own
personalintegrityinm•kingethicalde<:i$ions.Butknowing
what to do is nQt always easy. As a future managar, you will
surely face ethical ditemmH one day. The following guidelines
willnotte!lyouex.act!ywhat!odo,buttakenln!hecontextof
thetextdiscuss1on,thaywillhe!pyouevalua1ethe1ituation
morn clearly by examining your own values and those of your
o,ganisation.Theanswerstothesequestlonswillforceyou
to think hard about 1h11 social end ethical consequences ol
your behaviour.
Is the problem or dilemma really what it appe.ara to be? II you
arenotsure.findouL
SOUf\Cf: ........ A
MAMNAGEMENT IN PRAc:1r1iccE1========~
UNLOCKING INNOVATIVE SOLUTIONS THROUGH PEOPLE - IT IS POWER
(A.ND RESPONSIBILITY) TO THE PEOPLE
Feeling aU too burder,ed by responsibility, 24-year·old Ricardo
Sem!ercreateda newvisionforthricultureofhlsfamlly's
business in 1983, while recuperating from a stf9$s-relatad
illness. When Semler hlld taken over Brazil-based Semco
Corporation from his lather In 1980 as a freshly minted Ha1Vard
MBA (one of the youngest ever to earn the piastlglous degree).
the company was manufacturing equipment for a Brazman
shipbuilding industry thai Wa$ in abysmal shape. A$ Semeo's
prasidant and majority owner, Semler fired most ol lhe top
management and used a seri111 of strategic acquisitions to
steer the company into more viable markets . Ironically, as lhe
company's fortunes began lo revive, Semler's own heallh took
a nosedive.
As ha lay in a hospital bed, Semler had a vision lor a new
way 10 manage - by rallnqulshing control to his employee,.
Thus began a ftva.year ptocess of building I radlca!ly democratic
culture based on open lriforma!ion and emplc,yoo partlcipa1ion.
Semler started modestly - lettmg employees diOOS<l their uniform
colour, for uample - end even1ually moved to the creation of
egalitarian project learns that had complete responsibility for
particular projects, total authonty regard,ng how to perform the m,
and the opportunity for team members to pod(et a substantial
perm:,mage of any profll.ll gener.ned. Today, 5$ll~irected teama
form the basi1 of the company's loose, fieKibte oiganisation
structure. Paople typically have a chanl!III to choose what projects
Would you like to work in your pyJamas7
ifhe right way to interview a JO
........
ow to utterly destroy mot1vat1on
Gender differences in communication
LeaP.ing over language barrie s
lstheactionyouareconsider1nglegal1!shethlca17(fyouara
notsute,llndou1.
Doyouunderstandtheposltionol1ho$8whoopposathe
action you are considerlng7 lsit reasonable?
Who does the sction banefll?Who does it harm7 How much?
Forhowlong7
Would you be willing to allow everyone to do wha! you are
considatingdoing7
Haveyousoughttheopinionofotherswhoare
knowladge&ble on the subject and who would be obj11c1iv117
Would your action be embarrassing to you If ii were made
known to your family, friends. co-wort.ers or superiors?
Thernarenocom1ctanswerstoth0$&questionslnan
absoMa Mnse. Yet, ii you d'Utermine ihat an action Is potentially
ha1mful 10 110meone or would be embarrassing to you, or 11 you
donotknowtheethicalorlegalconsequences.th1169gu1delinea
wlllhelpyouclarifywhetherthaactionlssoc,a!lyrespons\ble.
t,l.ond\lofdtn, JA.('ttllll. n..-f~-alBuol,-.Orop.6Nrw\loflcWlley.
they w,11 work on, based on how they think they can best make a
contribution.
Semco u - few Job tiUes &nd only three management
levela: counsellors {the name Semler now goes by); partners;
and associates. The CEO pos!!fon rotates every siK months
among the counsellors. Wo1kara sat their owr, hours, alact and
evalua1e superviso,s, and have ma,Or Input ir,to how they are
compensated, with some actually $Siting their own pay r.nes. AU
financial information, inctud,ng salari11S, ls available to everyone,
and i,rry employee is allglbte to i,ttend i,ny meeting, including
board meetings, where two seats are reserved for employees on
a first-come, flrst-serYOO basis.
The result of 11pplying these rather radical cultural
values i1 that Semco has not only survived but prosparad
In Bruil'a often chaotic economic and political climate. The
conglomerate now produces 111 diverse range of products and
services, from manufacturing giant oil pumps to participating
in mall processing Joint ventures. Its revenues grew from
USS4 million In 1982 to approxlmataly US$240 million
recently.
'It's about competitive advantage; Samle r says. 'Once you stop
!rying to control employees.' he insisu;, ·you raleasa the pow&rrut
twin forces ol S(ll!~Jsclpline and peer pressure. Performanc.e
becomes the only criterion for success: Al Samco, ireatlng
employea1 li1te responsible llduhs ts Just good bualn&&a. With this
.......
GUIDE TD TH E TE XT xix
END-OF-CHAPTER FEATURES

of eac h chaP.ter. you will several tools

your. knowledge of the l<ey

Sustainable develoJJment
---....----·-,-- .........--...-
:;.:::::..-...;...:-:.=-:.=:-.::::::;:;.:_-:.=
·--~- ......-111o1.-·---------
SUSTAINABlf
DEVELOPMENT

.. ---- ....-.. . . . ------------

asP.ects of sustaina bility that relevant to tl'ie ACIKINDN
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GUIDE TO THE TE XT xxi

 Guide to the online resources

FOR THE INSTRUCTOR

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 PREFACE

TAKING THE LEAD

The world seems to be changing ever faster, with social, technological, economic and political forces
reverberating around the globe every day. Volatility seems to be increasing: just consider the 2011 earthquakes
in New Zealand and Japan, and the 2008-10 global financial crisis and the political and military problems
in Syria and Ukraine. Political turbulence increased in democracies such as the USA and UK in 2017, and
Europe's economic future is being partially destabilised by the UK BREXIT vote, after decades of stability.
Globally, managing increasing numbers of refugees is a challenge for many countries. Environmental issues,
particularly global warming, present major challenges to society. Managers need to know what is going on
in their industries and economies on a current and ongoing basis. In Australia, New Zealand and other Asia
Pacific countries, the challenges and opportunities facing managers have never been greater. New technology
and globalisation mean that managers in these countries must not just be competitive with the organisation
'down the road' or across the country, but must also recognise that the only realistic standard for comparison
of performance in the new millennium is 'world's best'. The announ ced demise of Australia's automotive
assembly industry (effective 2017) after more than 50 years of operations demonstrates the intensity of global
competitive forces. In every industry, competition is becoming fiercer each month, and there are always
winners and losers. Winners grow and prosper, but uncompetitive companies quickly wither away and their
shareholders lose their investments, while managers and other staff lose their jobs. Not-for-profit organisations
such as government service suppliers, charities and clubs must also excel in their focus and use of resources,
since their employees, consumers and suppliers have high expectations of effectiveness and output.
Technological change is accelerating and driving exciting new competitive dynamics in most industries. This
includes new process technologies such as manufacturing automation, and in particular the web-based and
social networking technologies such as Facebook, Instagram, Google and Twitter that are making information
available to people as never before. The Internet has a profound effect on all forms of organisation, business
and consumer behaviour. Consider how Amazon and eBay have impacted on consumer shopping habits. New
business models and innovative ways to combine products and services are made possible by the Internet, as
well as much richer, faster, cheaper and more detailed information exchange between businesses. The cost
of close coordination between organisations is lower as a result of these new technologies, leading to new
networks of collaboration within supply networks.
Another major trend that will impact on managers and businesses all over the world is the coming of age
of the Chinese economy and, behind that, India, Brazil and others. These low-wage countries, which have over
half of the world's people living in them and h ence huge internal developing markets, provide both opportunity
and threat for all Asia Pacific-based companies and coun tries. In addition, political instability, terrorism, disease
such as bird flu, climate change and other unanticipated events, coupled with the rise of regional trade blocs
and free trade agreemen ts, will impact substantially on the opportunities for companies to export and trade
globally. Managers must be capable of planning and leading their organisations under both stable and unstable
conditions.
Risk management and crisis management are new processes with which managers must formally engage
and become competent. Further, brought on by the collapse of major companies such as Lehman Brothers and
many others as part of the global financial crisis, managers must now demonstrate the quality of governance
in their systems and decisions, through compliance with strict new procedures, as legislated by governments
and required by sh areholders.

xxv
Another random document with
no related content on Scribd:
the French. Their movement was regarded as black treachery by
patriotic Germans, and when the French troops stood by the
Separatists while they seized public buildings and murdered German
police, previously disarmed by French orders, fury was unrestrained
among the German people. French policy, in this matter at least, was
a blunder, because from the first the Separatist movement had no
basis of reality nor any chance of success. It was an illusion of
French politicians who let their wish be father to their thoughts.

“The Black Horror”

Another cause of hatred in Germany, amounting to a mad rage

which made them see red, was the use of coloured troops in the
French zone of occupation. Under the name of “The Black Horror,”
German propaganda exaggerated and falsified the hideous aspects
of this last humiliation to their pride. It was asserted that masses of
African negroes had been let loose in the Rhineland to assault white
women and brutalise white men. The French denied that they were
using any black troops, and this was perhaps technically true,
although I saw with my own eyes Seneghalese negroes on the
banks of the Rhine. But they were not fighting troops. They were
transport men, lorry drivers, and ambulance drivers, in the blue
uniform and steel hat of the French poilu. I saw the inhabitants of
Bonn shudder and sicken at the sight of them. But it was true that
the French did employ large numbers of Moroccan soldiers in
German towns. They were not black, they were not even “nearly
black,” and in race they belonged to the same Mediterranean
peoples from which the French themselves have sprung. But that
made no difference in German psychology, and I sympathise with
their detestation of being controlled and put under the menace of
Moroccan troops who, whatever shade their colour and historical
ancestry, do not belong to our European type of civilisation, such as
it is, and should not be put in military power over European
populations. The British use of Indian troops in the white man’s war,
and the American use of black battalions, were, in my judgment,
similar errors which may cost us dear. But it was more than an error
to use Moroccans in time of peace among German citizens who
resented their presence as a shameful insult. These things are
beyond argument. They belong to the realm of instinct. It was
handing the Germans another cause of hatred.

British Policy and French Suspicion

Most people in England watched all these things with disapproval

and dismay. Gradually, as time went on, they drew further away from
the French policy in Europe. It seemed to them bad business and
bad morality. From a business point of view a great number of hard-
headed people in Great Britain could see no sense in demanding
payments from Germany beyond her power to pay, and in holding
her by the throat so tightly that in any case she could not pay.
Unemployment and bad trade in Great Britain were seen to be
directly caused by this situation in Germany, which at one time had
been England’s second best customer. It was not only the direct
trade between Germany and England that had declined, but it was
the indirect effect of Germany’s economic downfall all round the
world. If Germany bought less wool from Australia and less grain
from Canada, then Australia and Canada bought less manufactured
goods from Great Britain. If Germany were not trading profitably with
Holland, Denmark, and Sweden, then those countries could not buy
the same quantity of British goods. Germany was the axle-tree of the
great wheel of European trade which had broken its spokes and lay
in the ditch. Until the old waggon was on the road again England
would not recover her commerce. The French cried: “What about our
devastated regions? Who will pay for reconstruction if the Germans
are not forced to do so?” The English shrugged their shoulders and
said: “What about our devastated trade in Liverpool, Manchester,
Glasgow, London, and a hundred other cities where men are out of
work?”
Less than ten years after the beginning of that struggle in which
the youth of these two countries had fought side by side for the same
purpose, and with the same ideals, there was a friction between
England and France which obliterated the memory of that common
sacrifice in many minds and created suspicion, dislike and political
hostility.
The French Press and people abused the British for their
materialism. “That nation of shopkeepers!” they cried. “They can
think of nothing but their trade interests. They would sell their soul or
their best comrade for a mess of pottage!” They forgot that they also
were out for financial interests, that their policy was dictated by the
desire to get reparations out of Germany. And although England
advanced commercial reasons for relieving the pressure on
Germany, she had other reasons which to the French seemed sheer
hypocrisy, the most sickening cant. The English people and their
sister nations do not like kicking an enemy when he is down, nor
treading on his face when he lies prostrate. The old traditions of
sport, strong even in the Cockney mind, bid them shake hands with
the other fellow when he has been counted out after a knock-out
blow. They do not believe in “hugging hate.” They have an instinctive
sense of fair play. It is not too much to say that these were the
overwhelming reasons in the minds of the average Englishman
which made him dislike the entry into the Ruhr and the Poincaré
policy of “keeping the Germans down.”

Lloyd George and Poincaré

There was another reason, deep in many minds of humble folk

and great statesmen. They looked back to the War with loathing and
horror. They desired to support some better way of argument in
international disputes, so that there need be no “next war,” worse
than the last, between the same combination of Powers. They
believed in the spirit of the League of Nations as the only way by
which that next war might be avoided. They were hostile to any
Power which seemed to thwart the progress of that spirit. They
believed that the policy of Poincaré was contrary to the
establishment of good will among nations. They believed that it was
hurtful to future peace and leading inevitably to a war of revenge. For
that reason millions of people in Great Britain looked upon Poincaré
and for all he stood as the greatest menace in the world.
 Lloyd George was one of them. After the signing of the Peace
Treaty and a jingo election in which his followers appealed to the
lowest passions of the people, that extraordinary man, with his
nimble mind, his rapid vision, his instinctive Liberalism, his sincere
belief in righteousness (overlaid by the cunning and craft of political
necessities), led him into a crusade on behalf of a world settlement
by conciliation and compromise.
In conference after conference, with splendid courage, with
untiring zeal, with broad and liberal views, with an honest desire to
bring Europe back to health by fair play all round and business
methods, he endeavoured to settle the differences between France
and England over this question of Germany, to scale down the
German payments so that they were possible and not impossible, to
give France security, to bring Russia back into the family of nations,
to make some reasonable arrangement for inter-allied debts, and to
adopt a scheme of general demobilisation in Europe which would
relieve its peoples from crushing burdens and prepare the way of
peace. However one may criticise the character and quality of Lloyd
George, history will, I think, give him enormous credit for that great
endeavour to secure the peace of the world. At every conference he
was thwarted by France, whose difficulties and dangers could not be
reconciled by any of these plans, who regarded them all as treachery
to her people.
Briand concluded an agreement by which he released Germany of
certain obligations in return for a limited guarantee of French security
by British alliance in the case of a new aggressive war from
Germany. And with that document in his pocket Briand lost his job in
France. Poincaré succeeded him as the representative of French
nationalism, the military point of view, the unrelenting will of the
majority of French people to exact their full pound of flesh from
Germany at all costs. From that time onwards until the downfall of
Lloyd George himself the situation between France and England was
controlled by the diplomatic intercourse between Lloyd George and
Poincaré which developed into a personal duel of hostile views. In
every case Poincaré had the best of the argument on lines of pure
logic and abstract justice. It was right that Germany should pay for all
the damage she had done. Was France to pay?... In every
conference Poincaré stone-walled Lloyd George’s attempt at
compromise, by which logic should give way a little to general
interest and the military safety of France to a world pact of peace.
Then Lloyd George fell. By a frightful paradox his fall was partly
due to a call for war. The man who was passionate for the peace of
the world, who had given his health and risked his political career in
the cause of the pacification of Europe, raised a fiery torch to the
people—which fell like a damp squib in a cold sea. It was after the
tragedy of Greece.
For some reasons not yet fully known to history, Lloyd George had
fallen under the spell of Venizelos and his friends. Greece had been
given a new Empire in Asia Minor and Thrace at the expense of the
Turk, who had been utterly crushed by British armies. He turned a
deaf ear to all critics who prophesied that the character of the
Greeks would not be equal to these new responsibilities.

The Downfall of Greece

Meanwhile in Constantinople, where I happened to be, our Military

Mission was getting anxious. A new leader had arisen among the
Turks named Mustapha Kemal Pasha. Established at Angora, with a
Committee of Turkish Nationalists, he defied the terms of peace
imposed upon his people, refused to acknowledge the decree of a
Sultan in the hands of the inter-allied force, rallied to his standard
every Turkish patriot, raised a new army, filled Constantinople with
his spies and agents, and proclaimed a “Holy War” of Islam. He
vowed to recapture Smyrna, to liberate Constantinople, and to take
possession of Thrace.
The Greek troops before Smyrna were confident, as I saw them, of
holding their lines against the Turk. The Greek Commander-in-Chief,
whom I interviewed, was ready to break the Turkish lines “as though
on parade.” Lloyd George gave them the moral support of emotional
words, and they were very grateful to him, and believed that England
was behind him. The world knows what happened. Its conscience
must still burn at times as it hears the cries of terror and anguish on
that quayside at Smyrna when the Turkish irregulars set fire to the
Christian quarters and massacred men, women and children, while
British and American warships stood by, with their officers and men
staring through that pall of smoke and its rending fire, listening to the
shrieks beyond.
The Turks advanced to the Ismid Peninsula overlooking the
Dardanelles. They advanced to the very lines which the British
troops—young boys mostly—held at Chanak. Beyond that they could
not go without a war with Great Britain, which hung by a thread day
after day and week after week. The French, whose politicians and
public opinion were sympathetic to the Turks, and who were
incredibly jealous of British influence in Egypt, Palestine and
Mesopotamia—an old source of enmity stirred up again in military
minds—withdrew their own troops from Chanak, and left the British
troops isolated. They made it perfectly clear, very courteously, but
very firmly, that they would not engage in war against Turkey. It is
certain that the French people after all their loss of blood and years
of strife would have refused to support such a war. In any case, they
preferred the Turks to the Greeks, and were glad of the Greek
defeat.
To Lloyd George, in England, these Turkish victories were heavy
blows. His honour was engaged to Greece. He believed that British
honour was engaged, though certainly his pro-Greek policy had
never gained the support and enthusiasm of public opinion. He hated
the thought of seeing the Turk in power again at Constantinople. He
had incited the Greek Army to attack. The horror at Smyrna made
his blood run cold. It was Winston Churchill, without waiting for
Parliamentary sanction, who raised the fiery cross and sent an
emotional appeal for help to all the Dominions. It was received at first
in stony silence, and then with deadly hostility. Neither Canada nor
Australia would send a man to fight in a new war. They had done
enough; they were not interested. At home in England and Scotland
there was no support for a new war. There was a fierce outcry in the
Press. The nation refused to envisage war, for any reason. They
were sick of war. They could not afford it in men or money after
years of colossal sacrifice.
 The war did not happen, thanks a good deal to General Sir
Charles Harington, commanding in Constantinople. Cool as ice in
the face of extreme provocation, determined to keep the peace by
every method of statesmanship, unless his men were actually
attacked, it was his fine chivalry, his diplomatic wisdom with the
Turkish Generals and statesmen, which resulted in an Armistice
hanging on a hair-trigger. Lord Curzon patched up a peace which
gave to the Turks most of what they claimed and more than they
ought to have had in humanity and justice. The expulsion of the
Christian communities from Asia Minor was one of the most infernal
tragedies of history, hushed up in the British and European Press
because it hurt the conscience of too many of us. The flight of the
Greek refugees still calls to God for pity....
What a world—ten years after!

The Denial of Democracy

When I went about Europe I was dismayed by the denial of all

mental progress towards a state of peace. Physically there was a
slow recovery from war. Morally there was a reaction in many
countries to black passion, militarism, and ideas of Force. Austria-
Hungary and Germany were swinging right back to the old traditions
of nationalism. They saw no way of freedom except by future war.
They desired vengeance—against the French. They were talking of
calling back their Emperors. In Germany the Crown Prince came
home as a “private citizen” ready for a call to the throne at some not
distant date. The war which was to make the world safe for
democracy had been followed by a peace in which democracy was
repudiated by many leaders and by public opinion in many countries.
“I do not believe in democracy,” Herr Streseman told me in Berlin.
The Italian Fascists under Mussolini did not believe in democracy,
nor in Parliamentary institutions, nor in free speech. They
bludgeoned men who disagreed with their ideas and methods or
poured castor oil down their throats. They saved Italy from anarchy,
which was a good deed, but Mussolini, the autocrat, was quite willing
to play the anarchist against international laws, and did so when he
flouted the League of Nations and bombarded Corfu. Students of
world affairs, thoughtful observers like Sir Edward Grey and General
Smuts, men not given to exaggerated speech and morbid fears,
expressed their alarm at the state of Europe ten years after the
outbreak of the world war, and confessed that it seemed to be
slipping downhill towards general catastrophe.

The Revival of Hope

Since then something has happened to change the outlook of

Europe and renew the hopes of peace. It is the London Agreement
by which Germany, France, Great Britain, Belgium, and Italy agreed
on Saturday, August 16—ten years and fourteen days after the
beginning of the world war—to accept the chief provisions of the
Dawes Report for the restoration of German credit by international
loans and to establish a business settlement of the reparations
problem with German consent. As Ramsay MacDonald, Labour
Prime Minister, said at the conclusion of the London Conference, this
agreement was “the first Peace Treaty” since the end of the world
conflict, “because we sign it with a feeling that we have turned our
backs on the terrible years of war and war mentality.”
Three great events in the political world led up to this new hope of
peace and progress. The first was the friendly co-operation of the
United States in the endeavour to find a business solution on the
subject of German reparations. The second was the advent of a
Labour Government in England. The third was the downfall of
Poincaré, owing to a change of view in France which put Herriot into
power as an opponent of the Poincaré school of thought.

American Idealism

In the United States of America there had been a great searching

of soul, turmoil, and even anguish of thought since the downfall and
death of President Wilson. Although mass opinion had hardened
against any European “entanglement” and any place in the League
of Nations by which they would have to assume definite
responsibilities, there was always an intellectual and combatant
minority which protested against extreme “isolation” and a complete
denial of co-operation with European nations for the sake of World
Peace. In three separate lecture-tours in America, the last one from
coast to coast, I saw something of the tug-of-war in the mind of the
American people between the desire to escape from Europe and the
wish to take a full share, even the world’s leadership, in the
reconstruction of civilisation and its progress towards the
brotherhood of nations. On my second visit I saw a rising tide of
idealism in favour of international service. On my third visit it was
beating up still higher against walls of national selfishness,
indifference and hostility. A great deal of the idealism was vague,
verbose, unpractical, and without any definite goal. It was spread by
the women’s clubs, increasing in political activity and importance. It
was expressed by many writers and lecturers, including those who
had seen most of the war. It was discussed, heatedly, at every dinner
table and at every “party” where well-read men and women gathered
for conversation. Many financiers and business men, looking at
foreign affairs with cold science, backed up the arguments of the
idealists by saying that the United States ought to help to “straighten
out Europe” for the sake of world trade and world peace. Many
Generals and United States officers denounced war as an accursed
thing, and prophesied the destruction of civilisation if another world
war happened. Kinship with England, sympathy with France, made
some Americans of the old stock sick at the thought of their national
“selfishness”; though still, I think, the mass of the people were
indifferent and bored and tired with regard to Europe and its troubles.
But the idealists, the women, the pacifists, the internationalists, the
financiers, prodded up the indifference and brought pressure to bear
on their Government. No “entanglements” certainly, but some policy
of association with efforts for world peace. The Harding
Administration, elected to keep America out of Europe, was timid
and hesitating, but had goodwill, and heard these voices at the door.

Naval Disarmament
 It was President Harding, with Charles Hughes as his Foreign
Secretary, who summoned the Conference on Naval Disarmament,
and carried it through with triumphant success, due not a little to the
hearty co-operation of the British Government through its
representative, Lord Balfour. That limitation of naval armaments was
really the first step towards world peace, though many steps must
follow before peace is secure. It did at least one enormous thing in
history. It stopped the possibility of a competition in naval strength
between Great Britain and the United States which, if it had
happened, would not only have been a crushing burden to the
taxpayers but would have led inevitably to suspicion and hostility
between our two nations. The agreement of Japan was also a check
to a rivalry in naval power which would have produced explosive
forces and passions. The agreement did not stop the possibility of
naval warfare, but it killed its inevitability.
The conclusion of that conference re-inspired the idealists. It
encouraged them to further efforts to stimulate public opinion. Mr.
Charles Hughes suggested an economic conference in Europe
which resulted eighteen months later in the acceptance of the Dawes
Report. The women’s clubs, the peace associations, many of the
leaders of American thought, became more and more distressed at
the state of things in Europe, more and more convinced that only by
American participation, at least in moral and economic spheres,
could Europe solve its problems on lines of reasonable compromise.

American Sympathy with France

The majority of Americans undoubtedly were in favour of the

occupation of the Ruhr. They regarded Germany as a fraudulent
debtor. They believed in the “strong hand.” They had no patience, or
very little, with the British view, which seemed weak and sentimental.
Only the German-Americans, the Pacifists and the Socialists, with
here and there bankers and business men and “intellectuals,”
believed that France was not giving Germany a fair chance, was
thrusting Europe back into the mud and was violating the spirit of the
League of Nations. This view changed a little, though imperceptibly,
when France had entered the Ruhr and had failed to extract anything
solid from that nation. Even the warmest sympathisers with the
French point of view became a little tired of Poincaré’s “No, no,” to all
arguments on behalf of compromise, and of his nationalistic
utterances. American opinion, still hostile to Germany in the mass—
more intolerant of German character, and more convinced of her
exclusive war guilt than the British people who had suffered so
hideously—swung away from the Poincaré policy, at least to the
point of belief that the occupation of the Ruhr was no solution of the
problem but only a method of enforcing a solution that had still to be
found; and time was short. Germany’s policy of inflation, that
colossal fraud, had collapsed. Her money was waste paper, her
credit gone, her capacity to pay indemnities extinguished—for a
time. Some international scheme, divorced from politics, conducted
on strict business lines, must get at the real facts and impose a
settlement, or Europe as well as Germany would go down in chaos,
not without repercussion in the United States.

The Dawes Report

It was with the will of the people and an earnest desire to co-
operate in this enquiry and report, that the American Government
appointed General Dawes to the international committee which
investigated the state of German finance and recommended a plan
of action. It was another step towards American co-operation in the
arrangement of world peace, and the beginning at least of a
settlement in Europe based on business methods and common
sense.
The Dawes Report cut like a clean wind through all sophistries,
fantasies, illusions, and passions. It stated the realities, to France as
well as to Germany.... Germany was a bankrupt State with great
assets and immense potential energy. France and other countries
could get heavy payments in course of time—if Germany were given
industrial liberty and a loan to stabilise her monetary system, in
securities which were good. Otherwise, they would get nothing. Take
it or leave it. There were the facts.
 The acceptance and working of the Report which disillusioned
both France and Germany, and excited bitter opposition in both
countries, was dependent on one incalculable element—goodwill on
all sides. The German nationalists denounced it as an outrage,
French nationalists as a surrender; Poincaré was prepared to
discuss it subject to many reservations, including the occupation of
the Ruhr and the military control of the Rhineland Railways. Not in
that political atmosphere between the two nations was there a ghost
of a chance for the Dawes Report.
But then two other events happened in the political world which by
a kind of miracle changed the mental atmosphere of Europe, at least
sufficiently to secure the adoption of the new scheme. They were the
advent of the Labour Government in Great Britain and the downfall
of Poincaré.

The Social Revolution in England

The Conservative Government under Baldwin, which succeeded

the breaking-up of the Coalition under Lloyd George, deliberately
committed suicide by appealing to the country for a mandate on
Protection. Great Britain would have nothing of it at a time of
unemployment, heavy costs of living, and diminishing trade. But the
results of the election were unforeseen. The Conservatives lost their
great majority, the Liberals were reduced to a minority, and Labour
became the strongest single party in the new Parliament and
received its call to office.
It was the greatest social revolution that has happened in England
in modern history. The highest offices of state and of the very Court
itself were occupied by men who had begun life in factories, mines
and workshops, or who had gained political notoriety by attack upon
the privileges, traditions, social castes, and property rights of the
most conservative country in Europe outside Spain. They were the
leaders of that spirit of revolt which had surged below the surface of
English life among ex-soldiers who had not received reward for
service, unemployed men who were living on poor doles, and of all
those inarticulate millions who rallied to the Labour cause because it
stood solidly and squarely for anti-militarism and world peace, for
democratic liberties, and for ideals of a world state in which the
common folk should have security, more pay for less work, more joy
in life, and social equality levelled up to high standards of education
and home comfort. Those I am sure were the instincts and hopes—
not yet to be fulfilled!—which brought Labour into office.
They were there only on sufferance, and with guarantees of good
behaviour. A combined vote of the Liberals and Conservatives could
turn them out at any moment. But they played their cards cleverly, for
a time, not adventuring on any revolutionary policy, not trampling on
any old traditions, wearing Court uniform as though to the manner
born, pleased with their prestige and power, being very polite to
everybody, and keeping their hot-heads quiet by promises of future
reward when their majority would be substantial.
They were certainly lucky in having Ramsay MacDonald as their
leader and Prime Minister. A man of high education, though humble
birth, with a fine dignity and grace of manner, sincere in his ideals,
believing in evolution and not revolution, and with an intimate
knowledge of both foreign affairs and Parliamentary rules, he came
as no shock to the House of Commons, and inspired admiration
even among his political opponents. Unable to do much to remedy
the state of economic life in Great Britain—even to fulfil his promises
regarding a remedy for unemployment—he concentrated all his
efforts, wisely as well as tactfully, on the endeavour to solve the
European problem between France and Germany. He saw at once
that it would never be solved as long as hostility and suspicion
embittered the relations of France and England. The man whom all
England had accused as Pro-German wrote the most charming and
conciliatory letters to Poincaré, full of sympathy and understanding
for France. Time worked on his side. Poincaré was defeated when
he went to the country for re-election, and contrary to nearly all the
prophets, his policy was rejected and Herriot, corresponding to
Ramsay MacDonald as a leader of the Left, became Premier of
France.

The Defeat of Poincaré

 I was one of the few who had some inkling of the change of view
in France and foretold the peril of Poincaré. In conversation with
French people, and especially the ordinary working folk, I gathered
that Poincaré no longer held their confidence. They had backed him
when he ordered the occupation of the Ruhr, but only because they
believed that he would “deliver the goods.” Now they saw that the
“goods” were not forthcoming, and that, instead of receiving large
reparations from Germany, the franc was dropping, abruptly and
perilously. They believed that M. Poincaré was a little too “rigid,” too
much of a lawyer, and too little of a business man. They were aware
of all the hate that was being built up against them in Germany. They
said—many of them—“We are afraid of the future.”
It was above all that fear of the future, the terrifying spectre of a
new war, when not the great Black Army of Africa, nor all their
submarines, nor all their aeroplanes, would save France from
another struggle in which the last of her youth would perish, which
overthrew Poincaré and his “rigid” methods. France, by a majority,
desired peace, if that could be gained by some new policy, not
surrendering security, not weak, but more in accord with the spirit of
Liberalism.
There is no doubt in my mind that the result of the elections in
Great Britain and the rise of Labour in that country had a powerful
influence on the French election. It was a call back to democratic
ideals in Europe, against the militarists and Imperialists.
Anyhow it gave Ramsay MacDonald a wonderful, an amazing
chance. With Herriot, ex-Mayor of Lyons, advanced Liberal, leader of
Labour in France, he could speak on equal terms. They understood
each other’s ideas. They knew each other’s difficulties. Herriot, who
speaks German well and has studied their system of civic
organisation, had an honest desire to be fair and just to Germany
while not betraying French interests. He did not call the German
people “Sales Boches.” He did not want to kill their babies or starve
them to death. He acknowledged that they had a right to live. He
wanted to deal with them on business terms and, if possible—if
possible!—get their good will and free consent to a plan by which
French and Germans may live in the same world without periodical
spasms of slaughter. With Herriot and Ramsay MacDonald in cordial
agreement on the ideals of peace in the London Conference in
August, ten years after the beginning of war, the peace of Europe
had a greater chance than any other statesmen of England and
France would have made conceivable. Luck, or Fate, was on the
side of success.

The London Agreement

Those meetings of the statesmen in No. 10 Downing Street will

make a dramatic chapter in history when they come to be written.
Behind the representatives of each nation stood the forces of
reaction: sullen, menacing, obstructive. Herriot knew that if he
yielded too much he would be destroyed by the Conservatives of
France, by that formidable power still held by Poincaré and all he
stands for in French opinion. Marx and Streseman knew that if they
surrendered too much they would be overwhelmed by a Nationalist
outburst in their own country. Ramsay MacDonald knew that if he
asked either side to ignore their own public opinion the Conference
would fail and calamity would follow. The American Ambassador,
Kellogg, knew that his people would refuse to guarantee a loan to
Germany unless France withdrew demands which deprived it of all
security. Time and time again the Conference was on the point of
breaking down. The international bankers sat behind the scenes
refusing to sanction French plans for further penalties against
Germany if she defaulted in future payments. There was anguish
among the Germans when Herriot told them that his hands were tied
regarding the evacuation of the Ruhr and that no withdrawal could
be made until a year more had run. They saw his difficulty as he saw
theirs. The French would unseat him if he conceded an earlier
withdrawal. He pleaded with them to agree to this condition—utterly
opposed to the spirit of the Dawes Report—for the sake of the loan
of forty million pounds sterling, future liberty, world peace. The wires
were hot with messages to and from Berlin and Paris, where the
Governments insisted on national demands. The fate of Europe
trembled in the balance, until at last the German representatives
yielded to that year in the Ruhr, under protest, with misgivings and
forebodings, but with a hope that the enormous disappointment to
the German people would be outweighed by the saving of their
economic life, the future liberation from hostile occupation, a
postponement, at least, of ruin. So the Dawes Report was accepted
and signed, and the London Agreement began a new chapter of
history in which there is a promise—another chance—of peace at
last, and a spirit of conciliation between the nations.
 III.—THE PRESENT PERILS

There are still many danger zones through which our civilisation
must pass before there is anything like security against calamities
which might destroy it for a long chapter of history. There are still
many points of peril which make one anxious even for the immediate
future, and it seems to me that, without raising imaginary bogies or
allowing pessimism to paint too dark a picture, it is necessary to look
at these possible causes of trouble and to realise the very thin
ground upon which we are all walking above smouldering fires.
The present dangers which must be eliminated somehow lest we
all stagger on to catastrophe are of three kinds: racial, social, and
economic. The last indeed is of such overwhelming influence upon
racial rivalries and social upheavals, that many students of modern
history are inclined to believe that it is the underlying meaning of all
wars, revolutions, and human struggles. The pressure of population,
the need of food, the desire to get raw material for industrial
manufactures, national competition to capture trade markets, are,
according to the modern school of thought, the main causes of
international friction and explosive episodes.
I agree as to the terrific importance of economic facts, especially in
this present time of history, when the world has been industrialised,
but there are other instincts in the human heart beyond the need of
food, other passions besides trade rivalry. The passion of race is one
of them. The passion of liberty for the race or nation is intense.
National pride, sentiment expressed in symbols, such as the Flag,
religious fanaticism, such as that of Islam, set human hearts on fire
and make them careless even of self interest or self preservation.
Before looking at the economic struggle which is looming ahead, and
in my opinion is going to be a possible cause of another world
conflict, one may see signs of racial passion stirring in many parts of
the world and threatening its future peace.
 Racial Passions

It is in the very heart of Europe. Certainly the majority of the

German people refuse stubbornly to accept the consequences of the
defeat inflicted upon them as more than a temporary check to their
strength and supremacy among civilised people. They are so
conscious of their own genius in organisation and industry, so
confident in the future destiny of the German folk, so sure that their
increasing population is bound to prevail over the weaker and
dwindling stock of a nation like France, that they are only waiting for
the time when, as they think, the inevitable laws of history will carry
them in a tide over the present barriers that have been imposed
upon them. Meanwhile, they rage at the humiliations they have to
suffer, and brood over the injustice of their present condition. Their
sense of being the victims of world injustice is a fixed idea or what, in
the present jargon of psycho-analysis, is called a “complex.” It is not
less dangerous for that, and to regain their liberty of action, freedom
from foreign interference with foreign occupation, and release from
immense burdens of foreign debt, there are large numbers of
Germans who would willingly die with a racial patriotism and passion
exalted above all self-interest. Many old women in Germany would
like to march with sharpened scissors behind the German troops.
Many young girls would gladly go with their hatpins to stab a
Frenchman or two in revenge for the Ruhr. Europe will not be safe
until that racial hatred between France and Germany has died down
or has been killed by a new spirit and a community of interests.
Herriot, the democratic Prime Minister of France, was the first to
offer a truce to that hatred, and the new spirit has begun to work a
little on both sides of the Rhine, though it is a delicate growth which
will need great encouragement. In Hungary, and to a less extent in
Austria, racial passion is also smouldering, and could be quickly
fanned into flame. The Hungarians are a proud fighting race, who
feel themselves superior to neighbours like the Serbs and
Roumanians occupying some of their ancient territory. “It will not
always be like this,” some of them told me. “Something will break,
and we shall move. Not all the tears of women will put out the red
flame of that future war of liberation when we shall join hands with
our kinsfolk and smash these artificial boundaries imposed by a
scandalous peace.”
The Balkans are still a stewpot of racial passions and rivalries—
Serbs, Bulgars, Montenegrins, Albanians, Roumanians, Greeks and
Turks all snarling at each other, all waiting until the Great Powers get
to grips again, or are too busy to intervene between these smaller
nations.

The Racial Ambitions of Russia

Russia is becoming race-conscious again. Now that the

revolutionary period seems to have ended, and internal peace has
been established, the Soviet Government is thinking far more racially
than communistically. Communism no longer exists in Russia as a
strict system. It died before Lenin, who re-established the right of
private trading and private property with certain reservations which
do not affect the private citizens within the state to any appreciable
extent.
The Communistic propaganda is reserved mainly for foreign
consumption, in order to create trouble in other states and especially
to weaken those countries which are most antagonistic to the
Russian form of government. Men like Radek and Tchicherin, whom I
interviewed in Moscow at the time of famine, were beginning to think
again of Russia as a world power. All their talk was of that. They are
Russians before they are Communists. They would be glad to see a
world revolution, and their agents are doing what they can to
provoke it, but mainly because they see the Slav race rising above
that economic ruin and taking advantage of its weakness. Their eyes
are turned to Riga, outside their present boundaries, as an open port
when Petrograd is blocked by ice. They have no love for those new
Baltic nations—Latvia, Esthonia, and Lithuania—which gained their
independence at the expense of Russia. They hate the Poles, and
the new war, if it happens in Europe, will begin when Germany and
Russia try to join hands across the prostrate body of Poland.
The Germans are already in close commercial alliance with
Russia. German ploughs, railway engines, manufactured goods, are
being exchanged for Russian wheat, flax, furs, oil, and diamonds.
The Russians do not love the Germans, but they will co-operate with
them in self interest. A German revolution would please them
mightily. But German Imperialism will not be spurned by Soviet
Russia, certainly not by Tchicherin and his friends, if a military and
trade alliance would result in the downfall of Poland, followed
perhaps by the capture of Constantinople and the way through
Serbia to the Adriatic.
The old dreams of Pan-Slavism are stirring again among those
who control the destiny of Russia. Radek, the chief propagandist,
sees red in the direction of India and Afghanistan. The downfall of
the British “Raj” in India might be followed by a Russian Empire in
the East.

The Dark Horse

Russia is the Dark Horse of Europe. It is impossible to foretell

what road it will travel. Above the mass of ignorant and patient
peasants desiring peace in their fields and praying God for good
harvests, there is a crowd of nimble-minded men holding the
machinery of power: ambitious, cynical, with some cause, of the high
moralities preached by other powers, unscrupulous and
adventurous. Some of them, in my opinion most of them, are not
personally ambitious for gold or luxury or greed. They lead austere
lives. Tchicherin spends most of his days and nights in two little
rooms barely furnished. Radek has an untidy old den crammed with
books along a whitewashed corridor in the Kremlin. Most of them, I
believe, have a sincere desire to improve the conditions of their
people, to eliminate disease, to give them a decent share of human
happiness. They were relentless against their political enemies, like
all leaders of revolution who live in terror of reaction, and by their
terror are made cruel. They have an Oriental indifference for human
life, and they believe that a life is forfeited by crime or political
hostility to their way of rule. Many of these men were not personally
responsible for the atrocities which happened in the fever and
frightfulness of revolutionary madness. They are intellectual, highly