lead by getting out of the way

It’s surprising how many business leaders today still consider maximization of profits as their only goal. Many, in fact, see it as their legal obligation part of their fiduciary duty. I have had several very difficult conversations with experienced, successful people who contend that it is wrong for Boards and CEOs to do anything that threatens a company’s profitability, “It’s their money.”

And yet there is an ethical question that arises “How anyone can justify economic advancement (and personal wealth creation) at the expense of the larger economy, environment and society?” This question is being asked today because we have seen actions taken by few powerful corporations resulting in an almost total collapse of the financial system. The foundation of ethical leadership is ensuring the right balance between doing well for those whose capital has been invested and doing good for society.

A New Paradigm

A new paradigm is emerging among informed people everywhere with the opinion that sees the sustainability of economy, environment and society as something that must be given consideration in the purpose of all organizations – government, not-for-profit and commercial businesses. For at least the last hundred years, people have assumed that profits and sustainability are mutually exclusive. This deeply ingrained assumption is that considerations about the functioning of the larger economy, health of the environment and society will somehow have a negative impact on any organization’s goal to maximize shareholder value.

This assumption is built on two major flaws in our thinking. The first is that profit is the ultimate objective and overrides all other considerations. If something doesn’t generate the profit being sought, it won’t get attention. The second is that values – the principles that govern how we act – and profit are not compatible. This is why many organizations see values as a cost, taking away profits. Is it any wonder why so few show the courage and conviction to make values the primary mechanism by which they steer their firms?

Is sustainability really going to cost you?

There are many business leaders are seeking ways to make values, or a higher purpose part of their company’s ethos – their way of being and doing business. In fact, people are doing some amazing things to prove that achieving sustainability in your operations does not mean less profits, it means more! These people and companies provide the evidence that shows there are strong reasons to believe that business may be more profitable when it pursues a mission that seeks to do no harm.

It is vitally important that we begin changing these assumptions in all our leaders, including business. This change is in their interest (makes their organizations more effective, productive) and in the interest of their stakeholders. And most importantly, our collective interest.

Profit, from values

A strong competitive market position lies ahead for organizations that can successfully align their strategy so that the sustainability of economy, environment and society – the whole. When this is achieved and in the process, realizes sustainability for the organization. A leading example of this is Interface Global, a carpet company that has been adapting itself to do business in a more sustainable way since 1994. The strategy has resulted in several new large markets, and -take note – very large profits!

In this video, Interface Global’s CEO and founder Ray Anderson talks about how his firm has increased sales and doubled profits while turning the traditional “take / make / waste” industrial system on its head. In a gentle, understated way, he shares a powerful vision for sustainable commerce.

For some years now, business leaders and advisors have all been calling for change. The main message is we can’t continue to ‘do business’ the same old way, that we’re failing ourselves and our descendants, not just our shareholders if we don’t start to question the key assumptions we use to guide our decisions. One of the worlds first industrialists, Henry Ford said “[Profit] like happiness, is never attained when sought after directly. It comes as a by-product of providing a useful service.” If we as leaders are really serious about positive change, then the choice is clear: decide to focus our strategy on creating value in a way that is responsible to all then profits will follow.

There are still too many businesses with strategies that focus on unsustainable profits. They spend millions in an effort to persuade markets about low-value offerings and end up eroding the value of their business, the economy, environment and society. They use the two assumptions to generate policies that descend into unsafe practices that do little to deliver real lasting value. The strategies that result are simply not sustainable in today’s rapidly changing and complex world. Their architects, by virtue of the strategies pursued, prevent themselves from playing a constructive part in the real markets and society of tomorrow. Companies that aren’t constructive, risk becoming irrelevant. And perhaps this is as it should be. Just like all the markets and societies of the past, those in the future will be created by ones that identify and deliver real value. Any business that creates this kind of value doesn’t need nearly as much money and effort to sell, as it is often very evident to Customers when they see it.

Profit maximization by itself is simply no vision at all. It is empty of any real strategy and leaves the organization susceptible to the whims of changing leaders and worst of all, inspires no one at the operating level. A great majority of business leaders today accept that to “lead” an organization, requires a cohesive vision that drives the strategy and direction of their organization. This vision must capture the imagination and passion of all stakeholders: investors, staff, suppliers and customers. While there are few leaders today that disagree with these requirements, in practice they are very difficult to achieve. Ray Anderson of Interface and his vision of “zero impact” is a great example and inspiration that it can be done. This is their ‘higher purpose.’

The key to competitive advantage for successful companies in the future is to base strategy on value creation for all stakeholders. Future generations will view today’s way of doing business as misguided just as we view feudalism and the divine right of kings as incompatible today. The creation of real value that is in touch with universal values is the height of achievement and performance excellence.