Why Should I Give a $#*! About Values, Purpose, Culture and All That Other Stuff?
I have a confession: For over ten years I’ve been saying (and trying) to do the right thing, but I think I’ve been missing the bigger picture… and I don’t think that I’m alone.
During the last decade, I’ve spent a great deal of time focused on organizational culture. Mission. Vision. Values. Culture. Purpose-driven leadership. Essentially, it’s all of the “soft stuff” that’s in vogue right now within the business community. Let’s call this MISSIVIVCUP.
The people that I work with buy into the overall concept and understand the attractive and multiplicative power that it brings when executed with commitment. Yet, there’s a larger context that these concepts fall within. This concept isn’t often discussed within the small to medium-sized business community, but it does provide a frame of reference for understanding this “soft stuff” and also explaining why some leaders and organizations have yet to embrace it. The concept is stakeholder capitalism.
A Little History Lesson About Modern Capitalism
On September 13, 1970, Nobel prize-winning economist Milton Friedman explained the idea of shareholder capitalism in a New York Times Magazine essay titled, “The Social Responsibility of Business is to Increase Its Profits.” (Click here to read a reprint). This fundamental essay about shareholder capitalism changed U.S. business philosophy and the principles set forth are referred to as either the Friedman doctrine, shareholder theory, or stockholder theory. (I will refer to it as “shareholder theory”).
If shareholder theory is unfamiliar to you, here’s the gist: The purpose of an organization is to maximize returns to its shareholders. They are the only group that the organization is responsible to and they, not a CEO, are the sole arbiter of whether the organization bears any social responsibilities and to whom they might bear it.
By the early 1980s, the idea of shareholder theory had firmly taken root within the U.S. and transformed the way companies thought about themselves. Yet, there’s a competing idea known as stakeholder theory. It existed in this country before shareholder theory and it’s begun to return this century.
Stakeholder theory posits that an organization is responsible not only to its owners but other constituencies such as its local communities, suppliers, and employees. It is arguably a more community and value-centric theory of organizational responsibility and the ultimate driver of the recent sea of change we’ve seen in business theory. (Click here for more information about stakeholder capitalism).
Why this “Academic Stuff” Matters
Privately held companies take many of their cues from publicly traded ones. After all, it’s only natural for smaller organizations to look to larger ones for guidance. Unfortunately, for the past 50 years, small to medium-sized businesses have been getting the wrong message. And, as this sector has grappled with the idea of purpose, culture, values, etc. it’s often failed to succinctly articulate why this matters.
When we don’t understand the fundamental reasons behind what we’re doing, we often default to language that speaks of “competitive advantage” and “the war for talent.” Then we talk about “purpose” and finding “meaning in work.” These are all noble concepts that move your ship in the right direction. Yet, the fundamental question that you and your organization must answer is this: Are we a shareholder or a stakeholder-centric organization?
Do not misinterpret this question by implying that you don’t need to turn a profit and make money. Without profit, there can be no business… despite what you see in the start-up space. Instead, the answer to this question is the reason for your MISSIVIVCUP. It is the connective tissue that binds it all together.
Once you determine that you’re a stakeholder-centric organization, then it becomes much easier to answer the question: “Why do we need values, etc.?” because the “soft stuff” gains both context and focus. And if you’re only now developing the answer to these questions, it serves as a center point for the discussion. You’re no longer trying to justify why your widget factory exists by wrapping it in untethered concepts. Instead, you are planting a stake in the ground (pun intended) by declaring that you are a stakeholder-focused organization and that your MISSIVIVCUP exists to support that focus.
The pendulum has, again, begun swinging toward stakeholder capitalism. The only question is whether your MISSIVIVCUP exists in name only or whether true stakeholder capitalism is driving rewards that are shared broadly. If you need help, I’m just a phone call away.