September 28, 2016

Finding Meaning in Business

[This is reposted from HuffPo. The quick takeaway:
- Business schools and academics are talking about meaning and purpose a lot now
- I've seen more companies also talking purpose. The leaders seem to go back to the origins of their company and explore what the founders believed about their purpose.
]

Last month, 10,000 academics attended the annual Academy of Management meeting in California. These b-school educators came from all over the world to explore the state of business. The theme this year was fascinating: "making organizations meaningful."

A colleague asked me for my thoughts on the theme from my perspective as a sustainability consultant and writer. In short, I'd say thank goodness. The world needs business people with new skills to tackle big, thorny environmental and social challenges. Focusing on meaning seems like a solid way to introduce students to new ways of doing business.

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Some quick background: I'm not an academic, though I have played one on TV (or at least in streaming video). But as someone very interested in the role of business in society, I do keep some tabs on what the next generation of business employees and leaders is learning.

I also look back on my b-school education to get a sense of where we've come from. A couple years after I graduated in 1999, my career took a right turn. I had worked in traditional jobs in strategy, marketing and business development. But I followed my values to focus on helping business navigate environmental and social issues. It struck me then that during b-school, I had not once heard the words sustainability, climate, or carbon. I was taught, like almost all MBAs, that the focus of business is profit maximization and efficiency. The curriculum focused on traditional areas like strategy, marketing, accounting, and operations. And these were fundamentally sitting in separate silos of knowledge.

But today, in a world facing mega-challenges like climate change, resource pressures, and inequality, that traditional education is inadequate (or as another post in this series put it, being a good business school is "no longer good enough"). Our future innovators and business leaders need to understand systems, not just functional areas. For example, many organizations -- particularly energy and agriculture companies -- realize our stressed food, energy, and water systems are deeply entwined. Tackling this so-called "nexus" of issues requires different thinking. Students need training in how to approach wicked, interconnected problems.

Students also need new financial tools. Over the last 40 years, the percentage of a company's market value that is directly measurable (as quantifiable assets on the books) has plummeted. The hard-to-measure, like employee passion and knowledge, customer loyalty, resilience, and license to operate, can now dominate the value of a business. Studying accounting and not discussing at length the challenges and opportunities of valuing the intangibles would be absurd.

On top of all these new approaches to strategy, operations, and finance, students will need new people skills as well. Our understanding of people is changing. Out with the old economic view of utility-maximizing individuals, in with behavioral economics and psychology. Business leaders have to understand customers and their motivations and work collaboratively with a diverse group of people. So I envision ever-more focus on compassion, empathy, and ethics.

In total, all these skills will help ensure that businesses, organizations, and the people in them are more connected to the world around them (and more mindful in general). It's about making organizations, yes, more meaningful.

But a big question for me, and one that I suspect AOM academics are wrestling with, is this: meaningful to whom? For 40 years, the answer to that has been mainly shareholders. Business is just a source of good financial returns (mostly in the short run). And I would argue that operating in the way I'm envisioning -- with a deeper connection to environmental issues -- actually does create shareholder value.

But that said, I'm guessing that the Academy of Management is making a point that companies need to be meaningful to many more stakeholders. Just imagine designing an organization to produce meaning for employees, customers, or communities.

It might seem like a focus on meaning to multiple stakeholders is a new-fangled fad, led by wanna-be hippies or idealistic Millennials. But actually it's old-school. Having a broader view on why a business exists, going beyond shareholder profit, is not new at all. Robert Wood Johnson, founder of Johnson & Johnson, laid out a view of the company's purpose some 73 years ago. His "Credo" lays out five groups that matter to the business, starting with doctors, nurses and patients. After that, the focus is on mothers and fathers, then customers, then employees, and then communities. And only then, does he say that the "final responsibility is to stockholders" who will earn "a fair return."

These old-fashioned ideas are coming back. Consider Unilever, the most proactive of the big companies seeking to make sustainability core to business. In a search for some meaning, the company's executives started by digging into company archives. The founders, they discovered, began with a mission to foster health and cleanliness. Well over a century later, the company continues that purpose with campaigns to teach at-risk kids in the developing world to wash hands and avoid deadly diseases. As reminder, this is all great for business also: the company's purpose-driven brands - like GE's ecomagination offerings and Target's "Made to Matter" products - are all growing faster than the rest of the business..

I heard a similar story when I spoke recently to the dynamic CEO of Krug champagne (an LVMH company). Maggie Henriquez tells a compelling tale of how the company found itself again after a rough patch during the last global recession. She says they lost the thread on "why we exist," so they went back to the beginning. They located and read the founder's notebook from 1848. He wrote about the extraordinary importance of the land they relied on to make their wine, and how critical it was to connect with growers. Henriquez and her team adopted the founder's uncompromising philosophy and applied it to everything they do, from supply chain to operations to customer care. That was the way forward for the brand. Doesn't that sound like an organization that's found some meaning?

The bottom line is that the purpose of a business, if nothing else, is to solve a problem or fill a need for someone (to "create and keep a customer" in the words of the great Peter Drucker. Oh, and of course get paid "a fair return" to do it.

Making someone's life better by giving them something they need or want - a life-saving medicine, a movie, a shirt, a sandwich, a home, some legal advice, a bank loan...or a million other things - is what gives any organization meaning.

With the right training and a new mindset, taught by schools focused on meaning, the entrepreneurs and executives of the future will help build a more purposeful, thriving world.

This post is part of a series produced by The Huffington Post and LEAP!, the United Nations PRME Working Group on the Sustainability Mindset. The series aims to feature perspectives and insights from the 76th Annual Meeting of the Academy of Management Conference, Anaheim 2016. For more information about the Conference, visit www.aom.org.

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