The need for instant gratification and to show a profit no matter the cost to employees, society, or an organization’s welfare seems to be the motto in today’s business culture. Yet there are those few stellar organizations…and they are not all Fortune 500’s….that beg to differ. These companies invest in team building ideas that value employee contributions and are in business for the long haul. They don’t follow traditional business protocols and often shirk the methods of the publicly traded “big boys.” Will these organizations survive in today’s cutthroat business environment or be swallowed up?
Shareholder primacy as a management principle is without basis in law and has neither benefited shareholders nor society at large. Such is Steven Pearlstein’s argument in a recent Washington Post column – How the cult of shareholder value wrecked American business. Pearlstein posits that the relentless drive to meet quarterly expectations erodes incentives for firms to “do the right thing.” Options that bolster firms’ long-term health – including investments in workers – become secondary as a result.
All good points to consider – but here’s the rub: With over 6 million firms in the US, only 4,600 are publicly traded. A disproportionate emphasis on publicly traded firms distorts our view of what is actually happening in the economy. While publicly traded firms are under the greatest pressure to demonstrate quarterly gains, some do resist. Moreover, the other 5.9 million private companies often behave differently. Many can and do take a longer-term approach to business value. They present an array of management and organizational strategies that are testimony to the resilience and ingenuity of American business. These private companies are responsible for over 2/3rds of all jobs in the US.
Why then do we overlook the lion’s share of our economy when we talk about business? Just as the Federal government is not all government, public firms are not all firms. As Justice Brandeis observed that states can serve as laboratories of democracy, so too can private companies be the laboratories of capitalism.
Earlier this month, The Hitachi Foundation experienced the diversity of experimentation. Hitachi joined over 400 firms for the largest open book management conference in the country. The Great Game of Business, an organization in St. Louis, promotes Open-Book Management, an approach in which all workers have a voice in how the company is run and a stake in the financial outcome. Open-Book Management requires significant investments in team building training and management that can produce tremendous returns. Springfield Remanufacturing Center, which invented Open-Book Management, has seen its stock price increase over 1000% in the past three decades, and its revenues rise from $16 million to over $400 million. Open-Book practices have also proven effective for both small and large firms, including Whole Foods Market and Starbucks.
Earlier this month, the Hitachi Foundation released Doing Well and Doing Good, a new report chronicling firms that have succeed by integrating product, process, and workforce innovations. Business leaders in industries as varied as farming, auto parts, clinics, and convenience stores are experimenting with management structures and business models that paint a more nuanced and even hopeful portrait. These laboratories are sources of innovation that should not be overlooked. If short-termism is a wrecking ball, these may provide the building blocks for the 21st century alternative.
Following 20th century “business as usual” methodologies, focusing solely on shareholder expectations, and under utilizing employee talent is a business model in dire need of updating. When business leaders invest in their employees and companies for the long term versus short-term profitability, they reap ROIs well beyond the financial. Organizations who practice 21st century corporate team building methods take a longer term approach and use an array of management and organizational strategies to uphold viable business values.
Copyright TIGERS Success Series by Dianne Crampton
TIGERS Success Series is a team development consulting company that helps leaders build high levels of employee engagement and commitment buy developing group norms and processes that support trust, interdependence, genuineness, empathy, risk and success. TIGERS offers team building certification to HR professionals in the use of work culture and team diagnostics and tools that build and track high performance teams.