Weekly notes – Week 38: the impression economy

Following Professor Mats Alvesson‘s recent talk in Helsinki, Sitra’s Timo Hämäläinen explores the world of the impression economy.

The nature of advanced economies has changed fundamentally due to new information technologies, increasing mobility of productive resources and the growing importance of higher psychological needs. The new information technologies and mass media have made organisations, their products and individual lives more transparent and comparable. At the same time, productive resources – such as human capital, knowledge assets and financial capital – have become increasingly footloose, seeking the best place on earth to add value.

In Albert Hirschman’s terms, it is easier for today’s dissatisfied experts, investors and firms to “exit” their current relationships for better options than ever before. In addition, the growing affluence of people and the satisfaction of their basic needs have increased the importance of higher psychological needs, such as social esteem and self-actualisation. As Fred Hirsch predicted in the 1970s, a person’s relative position in the society has become an important determinant of happiness.

These three drivers ­– increased transparency, mobility and status needs – have created an “impression economy” where the success of individuals, products, organisations and even countries is shaped by their attractiveness and the impression that they make on key stakeholders. At the same time, the source of power has also changed. John Kenneth Galbraith has argued that, in the knowledge society, the power is based on persuasion rather than the stick and carrot of agricultural and industrial societies. Indeed, Mats Alvesson notes that some 25-30 per cent of modern economies involves persuasion work.

In his new book, Alvesson also argues that there has been a rapid explosion of “grandiosity” in advanced societies. By this he means that individuals and organisations are trying to boost their social status without necessarily having the corresponding substance to back up their inflated self-image. This “window-dressing” is exemplified for example by inflated personal CVs, grandiose job titles and impressive PowerPoint shows in firms, as well as self-nominated “strategic centres of excellence” and well-published but poorly implemented strategies in the public sector.

Despite its popularity, grandiosity is not likely to be a winning strategy in today’s information-intensive world – at least, not in the long term. Inflated claims will be exposed to public scrutiny at some point. More importantly, grandiosity and impression management distract individuals and organisations from the activities that would add real value to their stakeholders. In the end, sustainable reputation and good performance cannot be based on window-dressing.

References

Mats Alvesson (2013), The Triumph of Emptiness; Consumption, Higher Education, and Work Organization, Oxford University Press.

John K. Galbraith (1983), The Anatomy of Power, Houghton Mifflin.

Fred Hirsch (1977), Social Limits to Growth, Routledge & Kegan Paul.

Albert O. Hirschman (1970), Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations, and States, Harvard University Press.