In a recent New York Times editorial (“Paralysis Isn’t Inevitable” Sept 27), Joe Nocera wonders out loud how we will ever find solutions to intractable problems in our current state of paralyzed politics. He draws us to an article by Roger Martin of the Rotman School of Management that appeared in the Harvard Business Review about the phenomenon of the “talent economy” where talent has replaced both labor and capital as the most important factor in the economy; so much so that the talented can become billionaires while the medium income has stalled and slipped back. One has only to think of America’s Got Talent and the excitement when a perceived underdog like Susan Boyle contradicts all stereotypes with her talent and wins over the hearts and minds of the skeptical public. When income inequality is at a peak like it is now, despite what we think about inequality as a part of the economic growth story, it creates an unhealthy imbalance that erodes social capital, reduces hope and stifles opportunity. It also makes talent and wealth seem dangerously synonymous. For the wealthy, heightened inequality creates what Veblen famously described long ago as ‘conspicuous consumption’, the need to show-off wealth to signal status and difference, which reinforces the seemingly rightful place of the winners in a winner takes all society.
What’s so wrong with talent, especially if exploiting it leads to personal wealth? Don’t we want talented and wealthy people running our country and our companies? There is of course nothing wrong with talent, per se, except when talent becomes dis-embedded from purpose. The trouble with seeing hedge fund billionaires’ successes as the fruits of their “talent” is that it perpetuates the view, quite predominant in American culture, that luck is somehow fair because it happens on the individual level, not on the collective level. Bad luck on the collective level is a tsunami or a market crash. Even if luck were a legitimate way to acquire personal assets (versus, say, robbery or plunder), in this view it constitutes a gift, and as such, comes without any social obligation. If you are lucky or talented then you technically don’t have to take the rest of the population into account unless you want to. What follows, of course, is the assumption that if you happened to win the birth lottery with either talent or wealth, the system is in your favor and you have a responsibility to exploit it. Self-restraint in this worldview of luck and talent is considered unnecessary, at best, and irrational, at worst.
We see this same cultural response from the lucky and the talented individual in corporations on addressing the problems of the collective, like protecting the ecosystem by investing in clean energy. Corporations spend a lot of time evaluating the risks from the standpoint of self-preservation instead of self-restraint. The idea is that government and free markets are there to provide this balance, protect shared public goods and facilitate private sector investment without dictating how and in what way private sector should contribute. Modern portfolio theory suggests a company exists primarily to sustain the positions of the lucky and reward the talented inside the firm. Whatever benefit they provide to the collective is up to them and government will take significant legislative action to help “spread the luck around”, as it has always done. We often harbor back to 1930’s when the government passed laws to protect workers and helped bring about the rise of the labor movement or the Civilian Conservation Corps or the Clean Air Act.
Most know the truth of our times, however, that faith in government-led solutions is at an all-time low. According to the latest Gallup poll, only 42% of Americans report a great deal or a fair amount of confidence in government to solve domestic problems. The data is equally grim when it comes to international affairs.
Today, large corporations have an unmatched ability to influence individual attitudes and behaviors, both of their customers and their shareholders and senior management. Depending on how they decide to source, produce, market and distribute a product, companies successfully draw even the most untalented or unlucky (low-income) among us to feel the pull of conspicuous consumption through the influence of their brands.
How do we know when we buy a “green” product whether the company is doing harm or not? Maybe there is somewhere along the supply chain where they can’t have any control? How can corporations be convinced that the attention they pay to the environmental impacts, or to building human or social capital in the community, will ultimately pay off in terms of improving society, increasing customer retention and strengthening brand loyalty? What are the costs to the brand of not measuring impact?
I recently heard Tom LaForge, Global Director, Human and Cultural Insights at Coca-Cola, talk about Coke’s major lessons moving from the philosophy of “do not harm” to actually measuring the impact of their products through lifecycle sustainability assessments. He said, “Your culture is your brand.” How can we know, he asked, if the corporate culture is changing and a corporation (or any organization) is having a real conversation about social impact? He noted from his experience that change happens when the conversations become uncomfortable. Where the culture is open and encouraging dissent and failure, the conversations will be about things that permeate the walls separating the emotional, physical, intellectual and spiritual in a business. Transformation of any system, including the human being, entails shifts on both the internal and external, individual and collective dimensions. When an organization’s mission is using entrepreneurial innovation to achieve social value that is holistic, its culture requires a deep level of inquiry and systems in place for iterative adaptation and learning.
Social enterprises are legal entities created to find solutions to the intractable problems that disproportionately affect the “unlucky” public, and the demand for these new business models has risen as governments around the world have slashed social programs. But social enterprises are not just about using business for social good; social enterprise requires changing business-as-usual so that enterprises and their employees can serve a higher purpose and create tangible, measurable public value. They are created with the reverse philosophy: that inequality of condition is morally bad and that market forces will never adequately compensate for unequal conditions borne out of luck. This is why a social enterprise’s social mission is so central to the organization’s structure. Their legal form can vary, and we are seeing a sharp rise in Benefit Corporations[1] now numbering over 250 in over 13 states.
The most important thing that social enterprise models can teach corporations is how to use a company’s brand, and by extension its culture, to reflect its mission, vision and values. Once its highest purpose or mission is clear, social enterprises can show corporations how to then link a company’s brand strategy with its social impact metrics, thus driving a culture that is transparent and accountable throughout the supply chain, while encouraging employee and customer transformation, and in turn building confidence among managers to transcend mindsets and paradigms into new ways of knowing that engender positive and immediate action. This process is sometimes called net positive value creation, where the corporation moves from a principle of risk mitigation and “do no harm” to a logic of purpose, sustainability — and finally to restoration, where its own prosperity means the prosperity for the environment, their employees, the community and the society as a whole.
As the renowned economic historian Avner Offer reminds us from his analysis of Adam Smith, “well-being is more than having more. It is a balance between our own needs and those of others on whose goodwill and approbation our own well-being depends”. True freedom (built on trust and democracy) is not the absence of any social constraints or obligations, but understanding that through the practice of self-restraint we gain a disciplined life where we can creatively thrive and innovate as we work towards something higher than ourselves. Purpose-driven social enterprises, with their multi-stakeholder approach to defining impact, are demonstrating to corporations how their human capital inside and outside the firm will flourish when these interconnections are valued, not in spite of them.
At the D’Amore-McKim School of Business, where our school’s mission is transformation, it makes sense that there would be organizations and institutes like the Social Enterprise Institute (SEI) working to advance the field of social enterprise and help businesses work with their communities to better adapt to the cultural changes involved when creating value in an increasingly complex world. As Pavi Mehta, the granddaughter of Dr. V who founded Aravind Eye Care in India, describes in her book about Aravind, Infinite Vision, social enterprises are not simply market-driven, they are market-driving. Given the rocky terrain we have ahead – from climate change and immigration to global terrorism and the erosion of social capital in our everyday lives – we need social entrepreneurial market-drivers like never before. Corporations need new economic theories about how to grow sustainable portfolios where humans and the planet are at the center, and the language barriers between the culture of the firm, community and society are overcome.
Restoring faith in the public sector and curbing conspicuous consumption will take time, especially given the extent to which elite capture is entrenched in our financial system as evidenced by the recent National Public Radio report from This American Life on the complicity between the Federal Reserve Bank of New York and Goldman Sachs. We can change the language we use, however; and language is nothing less than the very culture we create manifested in the material world. This is where the craft of designing social impact metrics – combining quantitative and qualitative measures to understand multidimensional systems change – become game changing. Every human being has the need to live a life of purpose and meaning, and to feel this connection to purpose in the workplace. When a corporation behaves like a social enterprise, and explicitly incorporates its social mission into its brand strategy, thereby adopting a holistic, integrated way to measure its social and environmental impact throughout the supply chain, a new language is developed that adequately reflects the shared values of inclusivity, sustainability and the promise of a better future ahead.
When corporate leaders succeed at harnessing the talents of their team in the service of a social purpose-driven brand, and commit to the diligence we find in social enterprises to not only measure social impact but redefine it as restoration and obligation, then we may start to see the important transformation of our economic and financial system that we so desperately need.
[1] Benefit Corporations are a new type of U.S. corporate entity whereby corporations are required to provide a material positive impact on society and the environment and adhere to higher standards of transparency and accountability. The legislation has already been passed and signed into law in California, Hawaii, Illinois, Louisiana, Massachusetts, Maryland, New Jersey, Pennsylvania, South Carolina, Vermont, and Virginia and has been introduced in several other states.
