Who decides the purpose of business?

Innovation Conversations

Several posts ago I ranted wrote about modern-day Milton Friedmans who stoutly insist that the purpose of business is making money:   period, full stop, and that’s all there is to it.

This didn’t go down well with me; nor does it resonate with a large number of social innovators who are re-imagining the role business can and should play in a globalized, 21st century world–a world full of big opportunities, but big problems, too.   But it raises a good question:    Whose job is it to say what role business should play?

One person who has been thinking about that a lot is Whole Foods CEO John Mackey, whose talk with Darden (University of Virginia) School of Business professor R. Edward Freeman wanders a bit, but is still worth the listen. 

What particularly captured my attention was this “purpose” discussion.   I hope you listen to the video, but since it’s 41 minutes, I’ll paraphrase the central Q&A here:

Freeman:  There is a story in society, a narrative, that the only legitimate purpose of a company is to make money for its shareholders. You are a shareholder…what’s wrong with that story?

Mackey:   First you have to ask the question—where did that narrative come from?   Who has the right to define what the purpose of a business is?   I don’t think it’s economists.  Businesses are started by entrepreneurs…and they may want to make money, but that’s not really what is driving them.   What is driving them is some type of passion.   They were on fire about something…whether, like Bill Gates, it is do the software to fuel the PC revolution, or like me to sell natural foods.  The entrepreneur who creates the business is the first one who determines what the purpose of a business is.   Over time, it evolves with interactions with stakeholders…and changes with their inputs.   But I think it is a myth that the only legitimate function of a business is to make profits.

What’s interesting to me is not just what Mackey has to say about it, but that both Freeman and Mackey frame it in the context of narrative:    Evolved conventional wisdom. What everyone has come to expect. 

It’s amazing how we can live our life largely based on what we assume people expect of us–what we are born to do, what others like us do.   And Mackey is saying that the same goes for businesses.   On the one hand is the press of expectations to perform financially.   Business leaders feel the pull of that familiar narrative that they learned in business school, from those economists that Mackey is talking about, which tell them, “Those are distractions.  Your purpose is to make money.”    To be sure, some of the characters in that narrative are their shareholders, employees, partners—people who really matter. 

But there also are the pressures of social expectations.  Businesses today DO feel pressured, as never before, to make a positive difference.   They watch their peers saddle up on sustainability, or they watch them purloined for bad behavior and fear the same will happen to them.   Maybe governments are telling them:  “You may be here to make money, but we think your purpose is to help us develop and prosper.”    Or, new generations of talent won’t jump on board because they don’t feel the connection.  Those expectations can cause businesses to sign up to meet those expectations, willingly or grudgingly, so that a slightly warmer/fuzzier version of their narrative will play out than might otherwise have been the case. 

Usually both are in play, and thus businesses often appear to be talking from both sides of their mouths.  Today it’s doing good, tomorrow it’s doing well– and we should expect that, because it really ISN’T one or the other.   But it can be darned uncomfortable, because either way, you’re disappointing someone.         

My advice to entrepreneurs is to take a page from Mackey’s book:      

1. Embrace the tension.  No narrative that’s any good has been a straight path anyway.  

2. Go on offense.   Go back to first principles—just like Mackey has–and determine for yourself:    ”This is our business.    What do we say it’s here for?”

3. Engage and listen to people in both sections of the expectations chorus.   You won’t make everyone happy, but you can educate them—and learn from them.    Ultimately it might really REALLY matter, what they think.  Or not.   You have to decide.

4. Evolve and adapt.    The world is more complicated than ever. Everyone is making it up as they go along–and change is part of your narrative too.

5. And finally, recognize you have a story, regardless of whether you’re helping to define it or not.  So first:  BE it and then:  TELL it.    You are helping to build a new conventional wisdom along the way.

Is Green Part of Your Job Search?

As companies continue focus on creating alignment between key stakeholders, employees jump out as a vital sustainable business resource.  For some, eco awareness and sustainability skill sets may be the interview differentiator.

Examining the latest employment trends and extrapolating beyond the current job market, we see an increasing demand for a new kind of business contributor.  In addition to the growing demand for alternative skills, there is also an increasing desire amongst prospective job seekers to translate personal eco awareness and business sustainability passions into career ambitions. 

Our professional consulting experience leads us to believe that many of the businesses currently reducing their workforce will soon be returning to the job pool in search of the next generation of passion and innovation.  The new employer may not always limit its candidate search to the skills required for a specific job function.  Personal sustainability passion and innovative thinking might bring needed change to the organization.  

The convergence of business sustainability value and employment could be a stabilizing factor in the rebounding global job market.  In searching for that perfect career path, consider differentiating yourself and increase your personal value by:

•    Expressing an interest and passion for business sustainability.

•    Documenting a record of accomplishment in applying sustainability concepts in business.

•    Proactively researching the company’s sustainability initiatives.

•    Define and communicate how your sustainable knowledge and skills can directly benefit the company and its business sustainability direction.

By combining traditional business functions with an aligned passion for sustainability, companies are creating attractive work environments for sustainable-minded employees.  Polish your resume and interview skills with sustainability and get that great job today.

Looking for resources to get started?  Read the Vault’s CSR blog or follow @VaultCSR on twitter.  Also connect on VaultCSR on LinkedIn.

Additional resources include:
    • Directory of Green Jobs
    • Green Dream Jobs
    • Green Profs
    • JobsInSustainability or follow on twitter @jobsinsustain
    • Renewable Energy Jobs

    With a desire to extend a sustainable lifestyle to the workplace, there are employment options available to you.  As a sustainability consultant, I encourage you to make a powerful choice: choose meaningful work for yourself and a company that stands for the environment.

Re-Focusing Employees after Organizational Trauma

Session 4 – Re-Focusing Employees after Organizational Trauma, presented by Peter Ternes, Director of Internal Communications – General Motors Corporation (USA)  1:30pm, October 5th at HR Summit 2010.

http://www.conferenceboard.ca/conf/10-0164/default.aspx

General Motors employees experienced significant change in 2009 – to say the least!  In less than a year, they witnessed a dramatic drop in sales, and the subsequent bankruptcy and re-emergence of their organization.  Employees who didn’t retire or weren’t asked to leave faced pay cuts, retirement plan hits, job reassignments, and benefit changes.

In 2010 GM implemented a program called Outreach to re-engage employees.  The idea was to use the customer experience to refocus employees throughout the company on the bottom line, satisfying customers, and selling cars.  Peter Ternes will discuss what happened when GM sent employees into some of its toughest U.S. markets, and how this is now helping GM design, build, and sell better vehicles.

Register for the HR Summit before September 5th and save $100 using priority code 3BL.

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Use Green Teams as Team Building for Employee Retention

According to Winning Workplace’s post, Key Employee Engagement ROI Metrics: Tenure and Turnover, there is a connection “from team building efforts designed to keep employees engaged, motivated, and satisfied, and their ability to hold onto them longer, on average, than other small employers.”

 Upon first glance, the idea of a corporate green team may seem fairly simple—a small effort that allows a subset of employees to gather around a shared interest. In practice, however, green teams can be much more powerful than that. They can inspire, activate, and engage employees to create meaningful changes within a company. 

 However, sustainable businesses strategies aimed to increase profitability and productivity through employee retention can gain a competitive advantage over the competition by leveraging green teams as team building initiatives within the organization.  Sustainable business leaders are looking for ways to advance the corporate sustainability plan and team building via green teams is another solution.

 Winning Workplace’s post shows the impact of higher employee tenures and lower turnover on the bottom line to include:

• Improved ability to promote from within (saves on recruiting costs).
• More time to implement practices to capture and run with employees’ best bottom line-enhancing ideas.
• More time for managers and even their subordinates to improve vendor relationships, to lower costs and/or provide more value for the business.
• Typically stronger relationship-building with customers or clients, due to their interactions with the same people month after month, year after year.

 
How can green teams help?

• Green team meetings allow participates to meet, collaborate, and discuss on topics unique to their position in the organization.  Namely, issues and areas of specific interest in how it relates to their job, their departments, and the overall organization.
• Green team meetings leverage synergies that result from brainstorming sessions and sustainable business strategies implemented in other departments.
• Green team meetings foster socialization, and greater team work.
• Green team meetings allow for grassroots sharing of ideas, as well as a means to disseminate essential information related to the corporate CSR vision.
• They provide “on the ground” alerts to hot topics and cultural trends within the organization.  They embark on eco activities and expand eco awareness as a result of those activities.
• Green team meetings help foster a collaborative culture in the organization which helps organization to achieve its objectives collectively.

 
Employees are often argued to be the greatest resource of a company.  When employee’s values resonate with those of the corporation, they are more productive, loyal, and their work is meaningful.  Green teams functioning as team building initiatives within the organization have the capability to align the corporate sustainability within the organization.