A New Capitalist Manifesto?
Re-Imagining Business in the 21st Century

J. Jeffrey Spahn

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Why Why?

Executives may hesitate to take the time to examine purpose in the context of a crisis, wondering whether it is prudent when there are so many other issues pressing. The founding fathers of one of the most remarkable organizations in history didn’t think so. While being invaded the founders of the United States gathered for two days to adopt a purpose, The Declaration of Independence. They justified philosophizing in the midst of a crisis because they realized the power of rallying the hearts and minds, as well as the arms, of the colonists around a common cause. This esprit de corps prevails in social movements, militaries, religious causes, arts and athletics. Why not business?

Although Ford has not always been exemplary in the area of labor relations and product quality, in 1983 they did something unusual. In the early 1980s, you may recall the American car industry was reeling from Japanese competition. What did the leadership at Ford do? They went into emergency mode to do what they had to do to stop the bleeding and keep the company breathing. But they didn’t stop there. They examined their core reason for being. Doing so prompted Don Petersen, former CEO of Ford, to reflect, “Putting profits after people and products was magical at Ford.” 

Divergent Purpose

According to Webster’s dictionary an organization by definition is a group of people gathered together around a common purpose. Yet research indicates that business as an institution and many corporations are at cross purposes. What makes this even more of a crisis, particularly within an executive team, is that these cross purposes remain hidden under the table yielding suspicion or in fighting. These implicit cross purposes cause misunderstandings and distrust which in turn close down communication within boards or executive teams; just the opposite effect of the open and honest communication called for by most reform efforts.

During my research I would ask executives which of the following statements do they find themselves agreeing with.

There is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profit so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud....Social responsibility [is] a fundamentally subversive doctrine. Milton Friedman, “The Social Responsibility of Business is to Increase Its Profits,” New York Times Sunday Magazine, September 13,1970.

- or -  

My business school in America was wrong, I am now convinced. The principle purpose of a company is not to make a profit, full stop. To say that profit is a means to another ends and not an end in it self is not a semantic quibbles, it is a serious moral point. Charles Handy, professor at the London Business School, from The Age Of Paradox, 1994.

From these conversations with numerous CEOs I observed that  

·          About half of the executives believe the purpose of business is to maximize shareholder wealth and the other half believe it is something else

·          These difference exist among CEOs and within executive teams

·          These positions are strongly held and emotion laden

·          Many executive teams experience implicit cross purposes

·          Executives are often unclear about the interrelationship of priorities, profits and purpose.

Other research by Alfons Trompenaars reflects my findings that about half of the executives in the United States believe that the purpose of business is to maximize shareholder wealth. The other half see the purpose of business as contributing to the well being of society either through meeting customer needs, developing people, promoting a cause or making the world a better place through its philosophy and action.

Positions on either side were strongly held, sometimes with emotional fervor. For instance a professor from a renowned business school relayed how angry he would be if a company he owned stock in decided that their purpose was something other than making a profit by pounding vigorously on the table. Finally he said, “If people want to do good, let them go to other organizations  like a church, but let’s not mix the two.” Another interviewee with mirroring intensity exclaimed, “If we keep thinking the business of business is just business eventually the entire planet will be out of business!”

Priorities, Profits and Purpose 

Furthermore, interviews reveal that many very bright executives are confused about the interrelationship of purpose, priorities and profits. The necessary priority of profits often gets translated into the purpose of business without giving much consideration to a possible distinction between the two. This is significant because independent research from Harvard and Stanford suggests that corporations experiencing exceptional long term financial success espouse the  absolute necessity of profits and a purpose beyond maximizing shareholder wealth.

When a man who has nothing to eat prioritizes getting food on the family table he acts in a legitimate, necessary and honorable manner. However, if after securing plenty of food, he then lives to eat, it starts to work against him. His legitimate priority has become a deteriorating purpose. So it is with the business person who legitimately prioritizes making a profit and then lives to make a profit. If the legitimate, necessary and honorable priority of making a profit is not accompanied with a broader purpose, then it ironically can begin to eat away at profit.

Confusing priorities and purpose can jeopardize profitability for at least two reasons. First, without the compass of a clear business purpose beyond maximizing profits executives are more prone to make the type of decisions that we see at Enron, WorldCom, Tyco etc. Secondly, as already suggested, one of the surprising key characteristics of a corporation that experiences exceptional long term success is possessing a compelling purpose beyond maximizing shareholder wealth.

The emergence of a mutual economy is a manifestation of a wider human phenomenon called consilience. Consilience literally means ”jumping together”. It describes the occurrence of two seemingly mutually exclusive ideas or categories becoming not only compatible, but mutually enhancing. For example, the cover of a recent Newsweek edition reads, ”Science Finds God”. In the case of the emerging economy self interest and the common good, philosophy and business, economics and ethics, meaning and money, purpose and profits, competition and cooperation are jumping together. From a broader perspective this occurrence can be understood as an expression of western society’s healing of the pervasive cultural rift of body and spirit, and the individual and collective.

For an individual (person or corporation) to maximize its economic value it must participate in the whole system (economy, socio-political culture). Only for short periods can individual results be increased at the expense of the system. Just as is happening in Corporate America, the system always strikes back. As demonstrated in quantum physics and reflected in ancient wisdom literature: everything in our world connects and interacts. Regardless of surface appearances to the contrary, nothing functions in isolation.

New rules and regulations, more ethical corporate behavior are all necessary, but not sufficient to meet the challenge of corporate renewal. Deep lasting change requires a new vision of the purpose of business.

Sustained business renewal requires that business leaders open a debate that welcomes the expression of divergent  business purposes and holds the tension of opposing points of view, instead of dismissing them. This dialogue resembles putting together a puzzle; gathering all the different pieces, making connections and looking for a picture greater than the sum of the parts to appear. If we endure the inevitable frustration of such an inquiry a picture of a vibrant business purpose in the 21st century awaits.

Corporate America has an economic puzzle that needs solving soon. Now is the time for Corporate America, CEO roundtables, corporate boards and executive teams, to forge a common voice about business’ role in the world. Our freedom, our future depends on it.

"A great society is a society in which its men (and women) of business think greatly of their function." Alfred North Whitehead

References:

“Changing the Role Of Top Management: Beyond Strategy to Purpose” by Christopher A. Bartlett and Sumantra Ghoshal, Harvard Business Review, 1994 November

Built To Last by Collins and Porass

Consilience: The Unity of Knowledge by Edward Osborne Wilson

Synchronicity by Joe Jaworski

The Age of Paradox by Charles Handy 

 “Hot Groups” by Harold J. Leavitt and Jean Lipman-Blumen, Harvard Business Review, July 1995

For information about how you can participate in the Capitalist Manifesto Project contact Jeffrey Spahn at JSpahn1@aol.com.