Decades of drive toward a single bottom line seems to have caused a violent swing in the other direction, one that sought swift correction to complex social and environmental problems created by runaway capitalism. In their article “Runaway Capitalism” published in Harvard Business Review in 2012, Christopher Meyer and Julia Kirby note, “Certainly we humans have the ability to create incentives for bad choices that do not contribute to the long-term health of our enterprises.” We reduced success to a singular focus – short-term return on equity (ROE). Meyer and Kirby artfully explain where we went wrong in the early part of the last century, designing performance incentive packages based on what was objectively measurable, but almost always contrary to the mission and vision of a company. We monetized purpose.
The necessity of constant government intervention by way of regulations, since the birth of capitalism, shows us how easily we go off-track – the point of commerce and capitalism was (and still is) to better our lives. These days, the ROE balance dance is increasingly more difficult for many (if not most) businesses. Finding their way around a maze of compliance to regulations, fierce competition for top-level executives and an entire economy struggling through rapid acceleration and modernization is enough to want to throw up your hands and close the doors for good. While wandering through this complex maze, let’s remember – it’s always darkest before the dawn.
“Free enterprise capitalism is the most powerful system for social cooperation and human progress ever conceived. It is one of the most compelling ideas we humans have ever had. But we can aspire to even more.”– John Mackey and Raj Sisodia, “Conscious Capitalism” Is Not an Oxymoron, Harvard Business Review
The Corporate Social Responsibility movement began as an answer to runaway capitalism and single-bottom-line focus. Triple-bottom-line principles have emerged as a means to bring capitalism back to its core purpose of free enterprise for bettering our welfare. While the movement is still in its infancy, we have seen several large corporations miss the point, attempting to balance their “take” from the environment and public health with charitable contributions that don’t necessarily give back to those areas where they take the most – creating an ill-aimed Robin Hood effect. What would happen if those charitable dollars were set aside and reinvested in their staff and changing their business practices?
Conscious Capitalism takes Corporate Social Responsibility a step further. Rather than balancing what a corporation takes with charitable contributions, it goes deeper, focusing on “the innate potential of business to make a positive impact on the world” (John Mackey and Raj Sisodia,“‘Conscious Capitalism’ Is Not An Oxymoron,” Harvard Business Review). Profit with purpose is not the same as pledging charitable givings. We all long for purpose. Understanding that building a business on purpose is easier done with a new venture than retooling an existing organization, there are many faces to purpose. Refocusing “giving back” to your own employees is one significant way to change an entire community’s ecosystem.
In an article from rotary.org, Andrew Baker’s “Can Capitalism Save the World?” cites author and sociologist Nicole Aschoff’s skepticism of Mackey and Sisodia’s claims. She notes that “their arguments don’t acknowledge the severe limitations of what you can do with a business as your vehicle for positive change.” It’s a compelling argument – particularly considering that changing processes is a financially devastating prospect for many businesses. But does that mean we should be fighting to slow down the inevitable?
There is a force we can’t ignore pushing these changes harder than government regulations though….Consumers. In December of 2016, Forbes noted that “Millennial customers will dominate in 2017.” The buying power of this generation is pushing past the rest of us, and they are very interested in the practices of businesses they buy from – and seek employment with. The almighty dollar no longer reigns supreme. If you’re not operating with purpose, you’re likely to see a decline in your market share, or your pick of the talent pool diminishing. We may be evolving to a point where people are more important than profit. Finally.
What does all of this mean for us here in the Valley? What does a purposeful business look like? It’s especially intimidating in a low-margin, low-cost economic environment. Understanding our community, our economy, our environment and our people can go a long way in finding a purposeful path. It’s food for thought, and the beginning of a long conversation.