Managing with Soul

This is a great article about how business is more than a bottom line.

While most corporations don't go so far as to cook their books, are they not dedicated to making money above all else? Doesn't this overarching goal allow them to falsify their accounts, lay off workers, pollute the environment, and ignore their local communities with impunity? Doesn't it enshrine the stock price as the ultimate index of the company's value, on whose altar all other considerations of corporate worth are sacrificed?

Not necessarily, according to Batstone, who argues that corporations not only have a moral duty to be good citizens but can also improve their own commercial prospects in the process of doing business in an ethical way. Drawing on his experiences as a journalist, entrepreneur and professor at the University of San Francisco, Batstone says that policies such as supporting community groups, treating workers well, and minimizing environmental damage are no longer the preserve of liberal do-gooders. Public demand for responsible corporate behavior is now such that those who ignore it do so at their peril, he claims. Doing well is not only compatible with doing good; a successful business is increasingly reliant on an ethical code that permeates a company's external and internal life.

Profits are important, and I think every business has a moral obligation to focus on economic performance over and above all else. But managers have to realize that "economic performance" is different from profit. It takes into account the total economic benefit (or drain) of a business to society. Thus, it must factor in real costs that occur due to the social, cultural, and environmental policies of a company. The piece points out an example of a CEO who saw the bigger picture.

As an example of a company that embodies sustainable financial management and ethical business practices, Batstone lauds Clif Bar, a maker of high-energy snack bars for sports people and outdoors enthusiasts. Its founder, Gary Erickson, has expanded the business on the basis of demonstrable product demand rather than shareholders' goals for annual returns. That way, he has avoided the need to search for expensive outside capital in an effort to meet his stakeholders' demands. Building the company on outside money is likely to turn the CEO into a professional fundraiser, diverting his or her attention from actually running the business, Batstone writes. "If the CEO is spending 50% of his time looking for money, what the hell is he doing with his vision?" Erickson is quoted as saying.

Erickson not only decided to keep the company private but rejected a takeover offer from a major food company that would have brought him "an insane amount of money" because he didn't want to give up on the dream that had spawned the company in the first place, Batstone writes. He then bought out his partner's stake and became the sole owner. "By keeping the company private, I can ensure the quality of our work environment, follow our own social agenda and share the profits with those who come along for the ride," Erickson said.

Clif Bar's sustainable model is complemented by enlightened management in which workers are treated as partners and bonuses are paid annually based on an uncapped percentage of net profit. Erickson, a former competitive cyclist, pays his employees for two and a half hours of physical exercise each week, supports research into breast cancer, and has an in-house program on how the company can reduce its environmental impact.

Some managers see such things as taking away from the bottom line. In the long-term though, good policies such as those at Clif Bar can actually improve the bottom line. I wish more companies would stop focusing only on stock price or earnings per share. There is enjoyment to be had just playing the game. Some managers are too lazy to spend the time it takes to come up with win-win situations, and I say shame on those who take the easy way out instead of stepping up the challenges of a business. When you show your customers and employees that you really do care about them, that they are more than just the means to an end, I think that can be a competitive advantage, and the bottom line will prove it.

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