Monday, June 27, 2011

In response to the NY Times column “...To Be Good Citizens...Companies Should Just Focus on Bottom Line”

On June 14, 2011 Stephanie Strom of the New York Times informed us that according to a report put out by a high-priced advisory firm "To Be Good Citizens...Companies Should Just Focus on Bottom Line."

Really? It’s not surprising an advisory firm paid by the biggest corporations might come to the conclusion that “companies would achieve more social good by simply focusing on the bottom line,” but why give it any extra play?

Suggesting that greed results in good corporate citizenship is wishful thinking at best. How ironic that these same hard core MBA types who tell you “what you measure is what you get,” are trying to convince us that the best way to get good behavior is to look the other way. Spare me.
To Daniel Altman and Jonathan Berman, the consultants who wrote the report and used ExxonMobil and Cargill – poster children for the abuse of power - as examples of good corporate citizens - WOW – that’s bold!

Let’s look at Cargill for a minute. Owned by Monsanto this company has been rapacious in its search for profits, destroying the environment and farmer livelihoods around the globe. I’m sure they’re doing some good somewhere, but the net impact? Watch Food Inc. and discover what happens when the food industry focuses on the bottom line.

They talk about how nice Cargill is being giving farmers in Africa seeds. It may sound nice but in reality it is a clever, cruel trick which binds the farmers forevermore to the seed, fertilizer, and insecticide sold by Cargill and Monsanto. It’s no different than street corner pushers passing out freebies to the neighborhood kids.

Sighting ExxonMobil's safety measures? Really? Anybody recall the Exxon Valdez? It happened in the 80’s and we’re still cleaning up. Or more recently perhaps you heard that ExxonMobil lost a bid in federal court to dismiss a lawsuit filed by the Sierra Club because of thousands of violations of the Clean Air Act. Or that New York City recently received $105 million dollar settlement from ExxonMobil for its contamination of groundwater, ignoring warnings from its own scientists and engineers. Not because it couldn’t afford to clean it up, (they earned $10.65 billion in PROFIT this past QUARTER) but because they were focusing on the bottom line.

Unless required by law to be good corporate citizens companies cannot afford to be socially responsible. If the goal is profitability, the profit imperative will sweep everything else to the side. Corporations used to be more community-minded, when owners and management lived and worked in the communities that housed them. Today, with multinational corporations beholden to no person, state, or nation we’re seeing even the vestige of corporate citizenship dying. All that’s left is the fa├žade. And reports like this denying what we, as individuals can see around us every day everywhere.

There are many companies out there run by persons of conscious and good will, who work for a profit, but who give back, and behave responsibly. But as a company grows, and particularly when it goes public the profit imperative becomes paramount.

This business model which focuses on profitability to the exclusion of everything else has damaged our economic, environmental, and social landscape beyond recognition – I hope not beyond repair. What we need is a new game, with different goals, to which we can apply our intellect, creativity, our passion to win. There needs to be a new scoring system that isn’t all about profits. This new game called social enterprise, and measures success by net social impact. ExxonMobil and Cargill may have achieved some positive public benefits through their operations, but if you look at the net impact I think we as a society are on the losing end of the equation.

New business structures are being birthed to accomplish this goal, where profits become a means to an end, but not the final goal. It may seem impossible to change our current paradigm, but change does happen. At one point in our not too distant past slavery was seen as a valid business model. When we as a society decided that it was immoral to build wealth this way things changed. Today we look back upon that time with shameful wonder – what were we thinking?!

I believe we will one day look back on our current model with the same amazement wondering how anyone could have thought that by focusing on the bottom line alone anything good would result.

Saturday, June 18, 2011

When you think of innovation... think social enterprise!

What innovation offers to solve some of our social problems, attract young talent, and create jobs, all without putting a drain on tax revenue?

We have been hearing about the need for business innovation from leaders in all sectors, from President Obama in his State of the Union speech to Commissioner Daniel Esty of Connecticut's new Department of Energy and Environmental Protection Agency, who spoke before the Hartford Metro Alliance Partners' Economic Development Council on the first of this month. I couldn't agree more.
But after talking about the need for innovation what we are most likely to hear is a plan for providing economic incentives to spur that innovation. The thinking is that if we give the private sector enough incentives, they will innovate for us. It's like the old Skinner Box--reward the mouse with food pellets and it will run the maze.  But as Einstein suggested, problems can't be solved at the same level of thought used to create them. And since business is often the heart of the problems we face today, it seems wishful thinking to expect that business will solve them--especially if it's business as usual.
Fortunately there is a different business model that offers promise. It's called social enterprise, and it's really not that new. Think no further than Newman's Own--Paul Newman's line of food products from spaghetti sauce to lemonade--and you will see an example of a business that uses the power of the market to make positive social impact.  It's a simple concept. Business can be about making a contribution rather than simply a profit.  Profits are important of course, because without them a business cannot operate never mind accomplish anything positive. But profits can be a means to achieve a more satisfying, sustainable goal rather than the be-all and end-all.
The idea of social enterprise is simple, but its impact can be profound.  We've all grown up assuming that the only reason for someone to run a business is to make wads of money. But there is really no reason why entrepreneurs couldn't set up shop in order to combat homelessness, say, or create cheap, clean energy. They need to make a living of course, but their driving motive could be to make a difference. For those of us who grew up with a business menu limited to one of two choices--commercial or nonprofit--this hybrid choice of social enterprise represents a paradigm shift. Could we really have an economy that embraces a goal of giving back as a legitimate reason for being in business rather than just an afterthought, or an extension of marketing? Why not? And increasingly this hybrid model is demonstrating itself to be viable, and full of potential.
Newman's Own is doing it. Grameen Bank and Ten Thousand Villages are doing it.  My own company, The Walker Group, is doing it, as are many others. We need to spur innovation at the very core of how we do business, and encouraging social enterprise would be a great place to start.
People still stuck in the Skinner Box say the only way to effect change is through economic incentives. Let me ask you this: What makes you volunteer, join teams, worship, raise families, adopt pets? It's not money. Think about the last time you left work feeling really good about your day.  Did it have anything to do with money?  Think of something you love to do.  Would you love it more if I paid you to do it?  Research has shown that you would actually enjoy it less.  Yet in the business world we've talked ourselves into believing what we know in our hearts is not true: That money alone counts.   Fortunately the research is showing that kids coming out of school today have seen enough of the damage done by business as usual and they want something different.  They understand we can't go on as we have been, pretending that there is an endless supply of natural resources.  They want to make a difference.  They want to be part of the solution.
So while I agree with Mr. Esty that we need innovation I don't think tax incentives are the first thing to think about.  Like mice in the Skinner Box, it may create a certain kind of behavior that looks like innovation, but as soon as you let up on the food pellets, the mouse stops. We're looking for a more lasting and profound change.  We need to encourage a different approach altogether.  And the really exciting thing about social enterprise?  It doesn't put a drain on tax revenues.  Social enterprise gets started out of passion and caring by people who want to fix the problems we face today.  They don't need an economic incentive to put their ideas to work, they just need the opportunity.  It also appeals to the young people who have been leaving the state in droves.  Create a state in which social enterprise can flourish and we retain and attract this vibrant talent pool.
So when you think innovation - think social enterprise.

Full article - the CT Mirror