Occupy Wall Street is just the latest in a series of protests against the idea that businesses exist only to create economic returns for their shareholders. The idea that business should do more for society is appealing and requires more than light current forms of corporate charity. Two articles this year in the Harvard Business Review highlight the need for organizations to do more than generate a profit.
In January Michael Porter and Mark Cramer published “Creating Shared Value” that looked at creating value beyond financial returns. This month Rosabeth Moss Kanter published “How Great Companies Think Differently?” Both articles discuss a view of the organization as more than an engine for generating financial returns to shareholders.
Both articles are recommended reading for considering the ways in which business can create value beyond profits and market value. Creating value requires defining a broader set of values for organizations. In April of this year, Jeff Cole and myself authored and EXP report entitled “A different theory of the Firm and IT: comprehensive value and capabilities.” In that report, we defined a collection of value that we called comprehensive value shown in the figure below.
Creating comprehensive value does not involve trading one form of value against another. Rather it is about how we design ways of working that achieve positive results in each of these areas. For example, firms creating jobs that build the local skill base and support development of other companies and opportunities. Firms need the capacity to generate these forms of value in order to retain public trust, confidence and support their own economic viability.
Expanding the definition of value has been done before. Consider Henry Ford who decided to pay the exorbitant wage of $5.00 per hour to his workers to attract the best workforce and give them the economic means to buy his cars. Other social-capitalism practitioners like, George F. Johnson created entire communities, provided free healthcare and education all to secure the best workforce. Firms in the future will be judged and judge their success by more than bottom line. The challenge is how?
The challenge facing organizations is not one of how we add a sustainability dimension to our company. Creating a sustainability ombudsman is no solution to sustainability. It only provides a paper response for a pervasive issue. Rather it is how we incorporate values that go beyond financial value into our strategies, plans, and recognition of value. The debate of an organizations role in society is interesting, but the reality is organizations exist, they are real and they are part of the social fabric. The assumption that organizational success and societal success go hand in hand is true, but that relationship cannot be the only definition. Creating financial returns for shareholders is not the only societal impact. An organization’s impact is more than financial. It is comprehensive and hence the need for comprehensive value.
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