A lot of language connected with business has to do with aggression. Not only that, a lot of behavior in business can be aggressively competitive. Phrases like ‘eat what you kill’ illustrate the point. So do businesses have to be ruthlessly self-interested and aggressive to be successful? Is a zero-sum mentality the only way?
The need to do good
Let’s take a closer look at this. As usual, we frame the matter in the form of a conflict cloud from the Theory of Constraints. Let’s say that we have money to invest (our own or investors’ money). We feel the need to do good with our business. That need would prompt us towards creating a not-for-profit organization, whereas the need to be able to access and deploy capital profitably would prompt us to create a convention corporation for profit. We can verbalize a goal that satisfies both these needs as ‘Sustainable (ethical) capitalism‘.
Why the conflict?
What is it that makes us see the not-for-profit and the for-profit structures as being in conflict or incompatible? We get stuck in this state of impasse because of a series of assumptions or mental models. Writing a conflict cloud helps us dig up these assumptions so we can invalidate them and come up with a solution that is not a compromise and that satisfies the two, legitimate needs.
When we worked on this conflict with a client that was a public listed company, we helped them verbalize the following assumptions that kept them stuck in the conflict of pursuing a for profit and a not-for-profit structure for a new project. Although the assumptions were verbalized within a specific company, they are fairly universal.
•the pursuit of the greater good is associated with financially non-viable activities that can only support themselves through donations and philanthropy
•shareholder value is the main indicator of economic viability
•the long-term sustainability of shareholder value is disconnected from stakeholder value
•the use of funds by not-for- profit organizations is less efficient and effective than in regular corporations and ROI is much less measurable
•management accountability is more difficult to pursue in not- for-profit environments
•talented people are mainly attracted to conventional corporations
•making money and being socially responsible (doing good) are mutually exclusive
Break the assumptions, build a new possibility
If we can find a way to invalidate the above assumptions then we can build something that satisfies the needs but that is a new direction and not a compromise. We helped the client to appreciate that they could be part of a network-based economy where value is created not just for shareholders but for the entire network. This could be done through the creation of a B Corp, a form of corporation that makes a profit but that obligates itself to create general public benefit.
Philanthropy – not the only way
Philanthropy and charity are valid and necessary activities in any healthy society. By building the conflict between for-profit and not-for-profit companies we can see that companies have the opportunity to provide benefits for the community as an integral part of their activity and not only through a separate activity of philanthropy or charitable donations. This is a new kind of economics for a more enlightened and evolved market. It takes Corporate Social Responsibility to a whole new level.
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About the Author
Angela Montgomery Ph.D. is Partner and Co-founder of Intelligent Management, founded by Dr. Domenico Lepore. She is co-author with Dr. Domenico Lepore and Dr. Giovanni Siepe of ‘Quality, Involvement, Flow: The Systemic Organization’ from CRC Press, New York. Angela’s new business novel+ website The Human Constraint looks at how the Deming approach and the Theory of Constraints can create the organization of the future, based on collaboration, network and social innovation.