|ISSUE 5 - SPRING 2003|
A New Capitalist
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The current crisis in business creates an opportunity for Corporate America to define a more integral and profitable reason for existence. By doing so, business leaders can avoid being defensive, fend off more government intervention, move to restore public trust and take significant steps towards enduring profitability.
Clarifying businessí role in the world lays the foundation for sustained economic renewal. David Packard of Hewlett-Packard exemplifies this vision with these words to his executives in 1960. I want to discuss why a company exists in the first place. In other words, why are we here? I think many people assume, wrongly, that a company exists simple to make money. While this is an important result of a companyís existence, we have to go deeper and find the real reasons for our being.... a group of people come together... to accomplish something collectively that they could not accomplish separately---------they make a contribution to society, a phrase which sounds trite but is fundamental.
Without a clear business purpose guiding them, executives are more prone to make the type of decisions that we see at Enron, WorldCom, Tyco etc. In addition research suggests that the key to changing behavior, whether individual or institutional, lies in an awareness and reexamination of why we do what we do. Also, one of the surprising key characteristics of a corporation that experiences exceptional long term profitability is a compelling reason for being beyond maximizing shareholder wealth.
Further research suggests that hot groups or business teams experiencing unusual short term success find their work meaningful and firmly believe they are making a difference. Catalyzing long term business renewal or highly productive short term business projects often requires reimagining our motives. For these reasons and others it becomes imperative for Corporate America to search its soul and clarify its role.
A New Capitalism?
An emerging Capitalism understands that self interest and the common good, purpose and profits, ethics and economics need not be mutually exclusive, but rather can be mutually enhancing. Yet, my research indicates that many CEOs and executive teams do not share common beliefs on the interrelationship of purpose, profits and priorities. There now exists a window of opportunity for Corporate America to clarify its differences, deal with the paradox of money and meaning and forge a common voice about its role in the world.
Restoring trust in Corporate America requires a renewal of business purpose. Purpose in this context needs to be differentiated from mission, vision or strategy. Mission names what an organization does. Vision speaks to where it wants to go. Strategy draws a map for getting there. Purpose expresses the motive or reason for doing all of the above. Purpose is a more intangible dimension than the others and perhaps for that reason is often over looked or lumped into mission or vision. The key to changing behavior, whether individual or corporate, often lies in an awareness and reexamination of why we do what we do, i.e define the purpose.
A key to optimal performance and sustained excellence is possessing, or rather being possessed by a purpose. Being a part of a cause that is bigger than the self grabs the heart and excites the mind. It extracts a profound commitment. This esprit de corps prevails in social movements, militaries, religious causes and athletics. Why not business? In fact, research at Harvard and Stanford indicate that this occurs in corporations experiencing exceptional long term financial success
During an interview one highly regarded executive echoed the sentiment of others when he said, I donít feel as though I should be complaining, but Iím really not happy in my work. Just saying that makes me feel guilty because I make so much money and others would love to do what I do and make the money I do. I feel trapped. After informing the CEO that he would be leaving the company to teach, coach and write poetry, a cynical smile spread across the chief executiveís face then, after looking out the window to the expanding sea, he said I have often thought of doing something similar, but in 5 years my 20 million loan will be paid up, talk about golden handcuffs? In sharp contrast, another executive exclaimed Ė ďMy role in business fits me. It expresses who I am and helps me make a difference. I am passionate about my work and what this company does for people.
Can you imagine an entire company with this outlook? What impact would a critical mass of such companies have on the economy?
A Reciprocal Economy?
The title of the Bible of Capitalism is not the Wealth of an Individual...of the CEO.... of Shareholders....of a Corporation.... or of a Nation, but The Wealth of Nations. Certainly the title is not poverty of the CEO, shareholder or nations. The issue is not just wealth, but spreading the wealth. Rajat Gupta, CEO, McKinsey & Co. exemplifies this motivation by saying, "Business is a force for good. Itís a noble cause. To increase the performance of our clients helps create wealth and raises the standard of living around the world."
Adam Smith, the author of The Wealth of Nations, was not an economist.... an accountant ..... an executive........or a business professor. Adam Smith was a philosopher and not just any philosopher, but a moral philosopher! The book he wrote before The Wealth of Nations wasnít The Theory of Economics, but A Theory of Moral Sentiments. What business does a philosopher and particularly a moral philosopher have writing a blue print for the economy? The assumption at work here is that thinking and acting, philosophy and business, economics and ethics, meaning and money, purpose and profits are not mutually exclusive, but mutually enhancing notions. Adam Smith was an ethicists and an economist, and understood that both of these, business and ethics, are two sides of the same business coin.
The tumbling of the Berlin Wall in 1989, among other things, marked the fall of communism as an economic system. Capitalism emerged the apparent winner. Today that victory appears to be threatened, not so much by enemies without, but from within. Our current form of capitalism generally focuses on the needs of the self. Communism, at least in theory, focuses upon the common interest.
What needs to emerge, and in some circles is emerging, is what I call a mutual, or reciprocal, economy that focuses on the needs of both the individual and the collective. This economic model assumes that self interest and the pursuit of the common good, or the wealth of all nations, can be mutually enhancing. In this way it integrates communismís emphasis on the collective and capitalismís emphasis on the individual.
George Soros, a financier and one of the wealthiest people in the world, warned six years ago that laissez-faire capitalism holds that the common good is best served by the uninhibited pursuit of self interest. Unless it is tempered by the recognition of a common interest and not just individual interests, he warned that our present system is likely to break down.
R. Kaku, the chairman of Canon summed it well when he said that the only entity whose effort to create stability matched its self interest was a corporation acting globally. The logic behind this is that as the developing countries become more peaceful and prosperous they provide new markets for Canonís products and services. Addressing the wider conflicts in the world, investing in developing countries and transferring technology helps these countries become stronger economic entities. The government leaders of a particular country tend to serve only the interest of its citizens. Global corporationsí customers are not confined to national boundaries. They can only do business in a peaceful world. Therefore it has become in the self interest of global corporations to seek the well being and wealth of nations.
Far from being a naive unrealistic pipe dream, reciprocal economies do exist. In fact they thrive. Breakthrough research at Stanford indicates that corporations experiencing exceptional long term financial success are mutual economies. These global enterprises have figured out a way to maximize profits and serve the common good. Common good does not mean specific social projects such as various welfare programs. Instead it refers to creating an economy that is large, growing steadily and reliably and leaves out the fewest participants. Profits are a vital means to accomplishing other purposes whether serving customers, supporting a cause, developing people or building a better world. These enterprises such as Canon, Johnson & Johnson, Marriott and Sony have embraced the challenge of enhancing the well being of human life through business.