Aligning business performance and meeting the needs of the community/society

Throughout my life, I have witnessed the conflict between business performance being built around solely shareholder value, and the requirement for business to serve the needs of communities and societies. This particularly came into focus for me when I returned from living in the Middle East to live in England in June 2009. I was stunned by the complete focus on profit generation to the total exclusion of customer value. Companies have learnt to put into place terms and conditions, and business processes that are able to legitimately extract revenues from customers whilst at the same time minimise their cost of serving the customer.

I had the opportunity to read a great article in the Harvard Business Review that I thoroughly recommend to you. Creating Shared Value by Michael Porter and Mark Kramer with the following link:-http://hbr.org/2011/01/the-big-idea-creating-shared-value/ar/1

8 Responses to “Aligning business performance and meeting the needs of the community/society”

  1. Krishna Kumar Says:

    The amazing part is that it sounds so obvious, but the reality is far removed.

    Recently, the head of one of India’s largest political parties tried to downplay the unseemly actions of the Chief Minister of Karnataka (Bangalore is the capital of this State), who happened to belong to his party, but stating that while his actions “were immoral they were not illegal.”

    A rather strange choice of words from a lawmaker if we were to construe that laws are legislated based on strong moral principles.

    The traditional definition is that politicians are meant to work for the public good and business for their private benefit but the definition is getting blurred as is well brought out this article.

    As Corporations, like human beings are considered to be legal entities, perhaps we should attach a moral value to them by creating a Corporate hierarchy of needs akin to or derived from Maslow’s hierarchy!

  2. Tony Bury Says:

    Great input, KK… Interesting concept to attach a moral value to them by creating a Corporate hierarchy of needs akin to or derived from Maslow’s hierarchy. This works well with a human being as we have a “soul”. How could this apply to a corporate? Whilst a corporate is made up of human beings, the legal structure and responsibilities of a Corporate are solely to the shareholders and not to any other stakeholder. The only way to effect this change would be to create the Corporate hierachy of needs and then make it a legal requirement!!!

  3. Daniel Martineau Says:

    Thanks for sending this to me Tony. As you say, this condenses many of the moral principles of business that are too easily or too often overlooked. Reading this gave me shivers of recalling some of the horrors of working for a bank some years ago when the war-cry “shareholder value” was all the rage. Under that banner, which looked relatively attractive as a concept (what can be wrong with trying to be a more effective company for the benefit of its owners?), members of the Executive Committee (who incidentally, were highly incentivised to find and implement shareholder value) quickly alienated the most important constituents in delivering the company’s products and services; clients and employees! Please let us hope that corporations will strive to a more enlighted (and less greedy) future.

  4. Tony Bury Says:

    Thanks for your input, Daniel. My greatest concern in that within the pyramid of the three Values:- Shareholder, Customer and Employee, that corporations in order to achieve their shareholder value are resorting to a dilution of customer and employee value to achieve the increase in shareholder value which distorts the balance within society. Furthermore, it is much easier to achieve and therefore becomes the “easy” option for executives and management to meet their goals for which they are compensated. So fundamentally we need to ensure that “legally” a company has responsibility for all their stakeholders.

  5. Leon Beuyukian Says:

    Tony, indeed a great article. Micheal Porter’s book written some 20 years ago titled: “The Competitive advantage of nations” referred to the clusters of core competencies that nations had developed around their core industries by demonstrating for example how the Italian furniture industry was the world leading industry due its clusters of small companies manufacturing different parts of the furniture located within short distances from each other and hence creating the shared value communities that he refers to in this current article. There is no doubt that the current capitalist system must evolve. However one important consideration must be attached to the notion of “time” which he mentions briefly. I have always been amazed how listed companies are able to show profit and revenue improvements quarter after quarter without damaging long term interest of shareholders, employees and societies they live and work in (if ever they had the latter 3 in mind). There is no way on earth, that within this globalized world, where information is being transmitted at nanoseconds, top management of companies can sustain growth in profits and revenues without sacrificing long term goals or applying creative (or fraudulent) accounting techniques. Consequently my greatest concern will be how can we change the notion of “time” from short term to long term of all involved in the corporation i.e. shareholders, management, employees, the environment and communities they work, live and service in? Unless we change the notion of time, we can never achieve what Michael Porter and Mark Kramer refer to as shared values, creating clusters of complementary competencies and creating competitive advantages.

  6. Tony Bury Says:

    Leon,

    This is an extremely interesting perspective, as outside of the financial markets, there is an understanding that profits can increase and decline in order to meet long term goals. Whereas the financial markets price in a premium for those companies that are able to generate quarter on quarter increase in profits that you refer to. The question is how do we manage the power of the financial markets so that they can be realigned. Any views?

  7. Tony Bury Says:

    I have found an interesting interview of Michael Porter on the subject. http://www.bbc.co.uk/programmes/b00xj0r4.

  8. Bara Says:

    I joined the Mowgli Foundation I think I have a workshop on 19 in Egypt ..I’d like to get to know you

    I want to be an inspiring speaker .. I would like to owner a free space for young entrepreneurs beginners .. I want to be like you

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