The conscience-driven corporation
The great entrepreneurs were always driven by the meaning they found in making a difference in their respective fields. And this implies that you can be market-driven, yet have a conscience. In Part 2 of his exploration of the death of the profit motive, JERRY SCHUITEMA introduces the concept of contribution-driven corporations.
To argue that the best way of achieving this is to focus exclusively on the material benefit to be gained from the contribution seems illogical. It is saying that individuals give their best when they focus on their worst qualities such as greed and insecurity… that we only give to the extent that we know we will get. Such a human being will become dysfunctional.
None of us knows with certainty what we can get out of any situation but we know with far greater clarity and certainty what we are capable of giving. To restrict giving, therefore, to what we know what we will get restricts the contribution and negates our possible value. This is what risk and entrepreneurship is about.
The great entrepreneurs always went way beyond what they knew they could get. What drove their greatness was indeed the meaning they found in making a difference in their respective fields: “I will make computers accessible to the masses”, (Bill Gates); “I will build a car for the great multitude”, (Henry Ford); and “I will protect the consumer against exploitation”, (Raymond Ackerman).
To argue that their key concern was the profits they would make is not only presumptuous but demeaning. In any case, it makes no difference what we think they thought: they had to behave in the manner they professed to achieve what they did. They should be judged on that, not on our assumptions about their motives.
Another counter to the what’s-in-it-for-me argument is that a simple formula for economic success tells us that if people by and large are giving more than they are taking, they create surpluses and prosperity. If people by and large are taking more they are giving they create deficits and poverty. Giving in this case is not about handouts, but about giving time and effort.
Interestingly, Americans are the most heavily indebted nation in the world. The argument is simply that they can afford to carry the debt. My counter argument would be that if a billionaire needs to borrow money for living expenses he or she may not be living beyond his or her means but certainly beyond his or her needs!
World Bank research into what makes for national prosperity has shown that two key and indispensable elements are having an external focus and developing people. This implies a generous and contributory approach to the world. The same key elements are needed for company success and indeed individual well-being.
I believe that successful and sustainable companies throughout the ages have not been that by being driven by the profit motive, but by being market driven. Indeed this is one of the conclusions reached by Collins and Porras in “Built to Last” and “Good to Great”. The point is that business is successful despite perceptions about itself. It has intuitively understood and stuck to rules of service that is implied in the existential and natural relationship between supply and demand. The question simply is how much better could it have done if it understood its purpose of being of service to others and not the self?
My observations of business over a number of decades have led me to identify and define three “models” of company behaviour: profit driven, labour driven and market driven.
We are all familiar with the first which is the Anglo-Saxon capitalist flagship. The labour driven model was first understood to be Marxist in nature and thrived in Eastern Europe after the early 19th century. I believe these were not labour models but state driven models and clearly were headed for collapse. Labour driven companies still exist successfully today in ventures such as the Spanish Mondragon cooperative, the Israeli kibbutz and of course many economies in the Far East were successfully built up on companies that until very recently were labour driven.
One could also argue that the increased attention being given both in law and in practice to the role of employees is creating more of a hybrid between a purely profit driven and a labour driven model.
Both these models, however, still see the market as a resource that has to be “exploited” and begrudgingly recognise its importance as a means to an end of either maximising returns for the shareholders or for employees. The market driven model is the opposite. It recognises that customers are an end in itself and that profits and employee benefits are only a means to that end.
You may well ask whether this is not semantics if in the end all recognise the importance of service, whether authentic or rehearsed. Philosopher Bertrand Russell has argued that perceptions create their own reality. If we change our perceptions of the existential base and purpose of business I believe they will start looking and behaving radically differently.
The degrees of being market driven are:
o a good company says it;
o a better company believes and does it;
o And the best company measures itself by it.
In the first we have seen most companies change their mission statements to some or other laudable, externally focussed purpose. Few mission statements today contain the 80’s slogan of maximising profits. I am sceptical of how many companies today could argue that they are at the second level. Not many truly believe their mission statements as being much more than good spin, a bit of a rallying cry for staff and ultimately as a means of generating the biggest returns for shareholders. In practice, few would follow Peter Drucker’s view of profits “being the cost of staying in business”.
This is simply because none is at the third level of ultimately measuring their success by service or specifically their mission statements. The income statement, which is simply a reflection of how much shareholders have gained, still rules in theory and practice. I have already pointed out the fallacy of seeing profit and service as being synonymous. As long as profit is the ultimate measurement of success, behaviour will follow. Rugby enthusiasts have long understood how you can change a game by changing the scoring method.
There is an alternative, of course. It is the Contribution Account, which is based on a standard value-added statement. This measures wealth created which incidentally is also the only measurement of contribution that a company as a whole has made. Therefore it is also the only measurement of a company’s mission statement (assuming that the latter is a reflection of the contribution the company makes to its society). Adopting the Contribution Account will not “threaten” profits… only put them in their correct perspective of being an important sub category of any business.
The changing of our understanding of the purpose of a business will have a profound impact on business as we know it. It will change perceptions which will become increasingly intolerant of shoddy service, accounting manipulations, greed, corruption, and discord in the workplace. Shifting the accounts to Contribution Accounting will enhance common purpose and common fate amongst stakeholders and transparency, proper accountabilities, and self governance rather than externally imposed rules.
Its ultimate benefit will be sustainability because if there is one synonym in business it is service and sustainability.
Jerry Schuitema spent more than a quarter of a century in the front line of Economic communications. He pioneered many Economic broadcast products including the establishment of the Economics Desk at the SABC. A Fellow of the Institute of Management Studies, Schuitema has won several awards and citations, including the Rosholt Fellowship. He is the author of the best selling Econosense which has been prescribed reading at tertiary institutions. He is has just published Value Through Values. For more information, email Mandy de Waal or visit www.values.co.za.