Business Thought

Power: Great Responsibility | Creating the Virtuous Organization

As institutions, businesses of all sizes can derive power from their resources, relationships, reputation, and reach. Institutional power can be organized into three types, each successively more virtuous: 

-power over – Use of coercion to limit choices of others, either to promote self-interest or to push for positive impact in an unvirtuous system. 

-power with – Joint exercise of influence to capacitate greater impact, though sometimes at the expense of some individual values. 

-power to – Empowerment and responsibility to take independent action and lead others in creating a more virtuous system. 

The virtuous use of power by businesses depends on the type of power they are using and the purpose they are using it for. If informed by a deep purpose and oriented to its mission, a business can use its power to have a virtuous impact on its stakeholders, industry, and the world. 

Because power is inherently relational, the specifics of this spectrum of power look different with each stakeholder relationship, including those found in the supply chain, through competition and collaboration, by involvement in politics or public policy, while investing in community well-being, in use of customer data, and through monitoring financial transactions.

However in each of these relationships, a virtuous organization demonstrates an overall systems thinking in which they simultaneously check and use their power for the greater good. Interactions involving use of power with each of these stakeholders have different steps to become more virtuous. Virtuous organizations might use their power in a variety of situations. 

Supply chain. Rather than knowingly permitting their suppliers to treat employees unfairly or use unsustainable practices in their goods creation, virtuous organizations stand out for incentivizing and inspiring (rather than forcing) suppliers to take positive action and for providing hands-on support to them to develop into those capabilities. They choose suppliers who not only meet their desired criteria, but who are also eager to catalyze reform further down the supply chain as well. They work with them to coproduce virtuous products and employ a virtuous means of manufacturing those products. By using “power with” suppliers and setting high expectations and transparent practices, a virtuous organization can springboard into “power to” influence within its industry to create new standards for social good.

Competition. When a business achieves scale and leadership in market share, it develops “power over” other actors in the competitive landscape. Here, a business may inadvertently impede consumer welfare because a consolidated market can lead to reduced service quality, higher prices, decreased innovation, limited consumer choices, lower wages, and/or greater overall societal inequality. So how does a virtuous organization remain competitive in the market while still granting others the freedom to compete as well? One solution is to be consistently fair. Rather than looking for shortcuts to market leadership by taking advantage of or eliminating less powerful actors in the competitive landscape, virtuous organizations strive to differentiate themselves by meeting customers’ needs in a truly innovative way. They grow their business in ways that encourage sustainable industry growth and/or improvement. In this way, the development of industry best practices continues while innovation is simultaneously facilitated, improving the ability of markets to creatively meet consumer needs and improve society overall. 

Politics and civic engagement. Organizations also have tremendous power for good or ill through their involvement in political and civic affairs. A virtuous company can provide useful information, expert insight, and diverse perspectives to policymakers on issues that have the power to improve the lives of their customers and community. Political freedoms and equal rights are fundamental aspects of a virtuous system, and inaction on political issues may mean that one is acting complicit in building a non-virtuous system. In all these cases, a virtuous organization strives to represent its employees, consumers, and communities accurately and fairly. To increase the validity of an organization’s involvement in political affairs, this “power with” a diverse coalition of other organizations and strong support from citizens can be exercised collectively. 

Community and society. Organizations can respond to the increasing internal and external demand to use their ‘power to’ in order to positively influence critical social issues. By leveraging an organization’s access, visibility, industry leadership, resources, and social capital, virtuous organizations can raise awareness and call others to action. Corporate philanthropy is one way a company can use ‘power to’ as they invest their funds in socially responsible causes. When making investment decisions, virtuous organizations not only factor in financial rewards, but also consider the long-term social impact of their investments, including the long-term view of building more virtuous systems. There is a seemingly endless list of community and societal challenges to address, and organizations can’t sit at every table and solve every problem. Virtuous organizations prioritize which issues they can take a stand on, taking stock of all the various opportunities for impact and reviewing where the organization can make the greatest impact – based on the nature of the company resources, influence among decision-makers, and existing gaps in the efforts of others. Such action demonstrates an organization’s lived values. 

In a virtuous organization, corporate activism must be genuine with community interests as the priority. Smaller organizations may actually have an advantage in this aspect of the work, because while they may have less access to decision-makers, they typically have greater access to the community members they are advocating for. Regardless of size, virtuous organizations take the time to evaluate whether their work furthers the intended mission of the cause in an appropriate and sensitive way, or if there is a risk of co-opting the cause to increase their profit. 

Regardless of size or structure, the virtuous organization is regularly evaluating its ability to ensure that its power is used for good: to create a more ethical supply chain, healthy competition, civic freedom, and social well-being. This virtuous use of power will, in turn, gain greater community trust, reduce risk, and increase innovation through collaboration. Most importantly, it will enable organizations to shift systems to work towards improving the lives of people in communities and the broader world.

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