Business Thought

Virtuous Organization | Draft Chapters

This is an in-progress outline and draft by Jill Piacitelli for a book concept.


In 578 AD, a Korean immigrant made his way to Japan at the invitation of the royal family. Buddhism had begun to grown quickly in Japan, with the encouragement of the Monarch, Empress Suiko – a descendant of the Buddhist Soga clan. She brought in scholars and craftsmen from Korea and China as experts to support the growth. Shigemitsu Kongo was a renowned temple builder, and the royal family commissioned him to build the Shitenno-ji temple, which still stands today in Osaka.

Kongo saw an incredible opportunity. He knew he could be kept busy for decades building temples and formed his construction company Kongo Gumi. He underestimated by a few centuries – closing in 2009 over financing decisions rather than a lack of work. This business lasted 1,428 years.

Business has staying power. As long as there are organizations in the world (which there will always be – right? I mean, is even a tribe an organization that benefits from the following?), there will be a need for the basic core components of business. As long as organizations have to interact with each other and/or the public, there will be a need for marketing. As long as there are resources to account for, there will be finances and accounting. As long as there is something to be done, there will be a need for the skills of strategy and for the implementation of human capital to accomplish the organizational aims. 

Getting a much later start than Kongo Gumi was the British East India Company, a company focused on trading basic commodities between England and the East Indies (the area encompassing present day Malaysia, Philippines, Singapore, and Indonesia). EIC’s official royal charter in 1600 marks the formal origin of the very construct of corporation in business. New and different to prevailing business traditional was the opportunity for certificates of ownership, or shares, to be purchased and held by members of the public. These shareholders could now buy or sell their shares to others without any effect on the existence of the company. This type of legal incorporation created a “publicly traded joint-stock corporation, an entity with rights similar to those of states and individuals, with limited liability and significant autonomy”. So, a corporation had a “legal personality” separate from the shareholders, who become only liable for the company’s debts according to what they had invested. 

In the centuries to follow, the idea of corporation has been “matured, over extended, reined-in, refined, patched, updated, over-extended again, propped-up”. It’s widely acknowledged that the next fifty years will contain some seismic shifts to this business construct, with some even predicting the end to the corporation. 

This turbulence in governing ideas and principles of organizations is pointed out by many scholars over the last 50 years.  in dominant values have occurred in organizations over the last 50 years or so; at least four major shifts can be identified (Cameron and Quinn, 2006). The early organizational literature emphasized traditional business values such as efficiency, control, specialization, and rationality (Weber, 1947). These values were highly effective in helping organizations achieve efficient, reliable, smooth-flowing, and predictable output, especially in relatively stable environments. A turn in dominant organizational values also occurred toward market mechanisms, mainly monetary exchange. That is, the major values focused on transactions (exchanges, sales, contracts) designed to create competitive advantage. Profitability, competitiveness, bottom line results, strength in market niches, stretch targets, and secure customer bases supplemented the more traditional values (Williamson, 1975; Ouchi, 1981) and became dominant in organizations. Still later, shared values and goals, cohesion, participativeness, individuality, and a sense of we-ness began to achieve prominence. Instead of traditional rules and procedures or the competitiveness of profit centers, typical values focused on teamwork, employee involvement, and corporate commitment (Ouchi, 1981; Pascale and Athos, 1981; Lincoln et al ., 1980). Finally, the hyper-turbulent, complex, accelerating environments of the 21st century led to still another shift in values toward innovative and pioneering initiatives. Organizations and leaders emphasized developing new products and services and preparing for the future, and the major task of management became to foster entrepreneurship, creativity, adaptation, innovativeness and activity on the cutting edge (DeGraff and Lawrence, 2002; Tushman and O’Reilly, 1997).

In its 400+ year history, the corporation has achieved extraordinary things, cutting around-the-world travel time from years to less than a day, putting a computer on every desk, a toilet in every home (nearly) and a cellphone within reach of every human. It even put a man on the Moon and kinda-sorta cured AIDS.”

Culture is the most mysterious, illegible and powerful force. It includes such tricky things as race, language and religion. Business, like gravity in physics, is the weakest and most legible: it can be reduced to a few basic rules and principles (comprehensible to high-school students) that govern the structure of the corporate form, and descriptive artifacts like macroeconomic indicators, microeconomic balance sheets, annual reports and stock market numbers.

But one quality makes gravity dominate at large space-time scales: gravity affects all masses and is always attractive, never repulsive.  So despite its weakness, it dominates things at sufficiently large scales. I don’t want to stretch the metaphor too far, but something similar holds true of business.

On the scale of days or weeks, culture, politics and war matter a lot more in shaping our daily lives. But those forces fundamentally cancel out over longer periods.  They are mostly noise, historically speaking. They don’t cause creative-destructive, unidirectional change (whether or not you think of that change as “progress” is a different matter).

Business though, as an expression of the force of unidirectional technological evolution, has a destabilizing unidirectional effect. It is technology, acting through business and Schumpeterian creative-destruction, that drives monotonic, historicist change, for good or bad. Business is the locus where the non-human force of technological change sneaks into the human sphere.

In 2008, Harvard business school professor Rosabeth Kanter proposed “The Corporate Conduct Continuum”. She laid out a sequence of values and ethics arranged to assess organizational integrity and engagement. Such models are helpful reminders of what businesses can aspire to, beyond simply profit generators for shareholders. In fact, even as s business values shift, their capabilities typically do not. It is always possible to create a company worthy of admiration. Companies have a vast range of such capabilities: to build leaders, to design easy-to-use products, to create a transformative experience, to innovate and shape industry, to generate wealth and alleviate poverty.

A virtuous organization achieves the greatest possible good through all available avenues. We want to build virtuous organizations, but balance sheets (even those with two or three bottom lines) do not automatically identify organizational virtue. Social responsibility initiatives do not erase harms and waste. Volunteer programs cannot overcome demoralizing or degrading HR practices. Philanthropy does not make up for environmental depletion and damage. Business needs to move beyond the rubric of “responsibility” into one of “virtue.”

This book will explore and debate how companies can raise their total value by maximizing 14 specific virtuous value propositions – and prepare students to critically evaluate the attributes of the organizations they observe, work for, and patronize. Student participation in this course will also contribute to ongoing research about the value of for-profit enterprises in forwarding social good. What businesses really are has never been more transparent or consequential. Emerging leaders can bring this highly relevant, but rare depth of insight and quantitative backing, to the vision and skills they bring to companies and organizations. 

Chapter 1 | Introduction to Virtuous Organization and Refreshing Key Concepts

  • Virtuous Organization and need for the class
  • Overview of the 14 concepts
  • Quick and review of organization types, in general? 
  • Overview of the history (and future) of the corporation?
  • Organizational structure of corporate giving: marketing dept, philanthropy, other biz org (pluralsight)
  • Basic Economic Theory (market failure, public value failure, bureaucratic failure, the effect of price and quantity on surplus and loss. IRS 501c tax code)
  • Ground rules for analysis (and articulation of grounding of comparison)
  • Teams created

Adam Smith put this keystone philosophy of capitalism into the world, the same year the United States of America was born, the keystone of democracy. 

Adam Smith: Every individual… neither intends to promote the public interest, nor knows how much he is promoting it… he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. (The Wealth Of Nations, Book IV, Chapter II, p. 456, para. 9.)

Frequently the self-interested action could lead to the greater good: more innovation, better investment, more productivity, more wealth, a larger pie for everyone. (Sal Khan) Can we ensure that it just does?

Identifying our implicit mental models for why we believe/categorize organizations into good, bad, neutral.

[If this discussion is to make any sense, we need a quick primer/reminder on basic economic theory. We know that a perfect market, where supply and demand meet, is mostly theory. Here, the buyers and sellers are so numerous and well informed that monopoly is absent and market prices cannot be manipulated.]

Market failure is a situation where, in any given market, the quantity of a product demanded by consumers does not equate to the quantity supplied by suppliers. Let’s stretch to think about these for a moment. The four types of market failures typically addressed are public goods, market control, externalities, and imperfect information. 

Former chief economist for the World Bank, Nicholas Stern, called climate change the greatest market failure in human history

Reasons for market failure include: positive and negative externalities, environmental concerns, lack of public goods, underprovision of merit goods, overprovision of demerit goods, and abuse of monopoly power. 

Market failure occurs when a market is unable to manage its resources efficiently due to the breakdown of price mechanism caused by externality or market power. A market failure results when prices cannot achieve equilibrium because of market distortions (for example, minimum wage requirements or price limits on specific goods and services) that restrict economic output.

Getting up to speed on basic economic theory (market failure, public value failure, bureaucratic failure, the effect of price and quantity on surplus and loss. IRS 501c tax code) and set some ground rules for the analysis to follow. We create teams. We identify organizations we believe to be “good,” “bad,” and “neutral,” and start thinking about our implicit mental models for why. We get a general sense for the state of social impact accounting and CR. We identify and refine the list of 14+ topics we will cover the rest of the semester.

Chapter 2 | Warm Glow

In the late 1980’s, economists began to challenge the notion of pure altruism – the belief or practice of disinterested and selfless concern for the well-being of others, with no internal or external reward for helping people. This approach to do-gooding also avoids the egoistic motivation for donation, as a boost to self-esteem as people think of themselves as self-less, socially responsible, or when others recognize their philanthropy. 

James Andreoni forwarded the theory of “warm glow giving” that attempts to explain why people give to charity – less for others, and more for the positive emotional feeling they get from helping others. There is physiological evidence for the warm-glow phenomenon, as it lights up certain parts of the brain. Pete Singer, (The Most Good You Can Do) talks of effective vs emotional altruists. 

[JP – So what really is the benefit for a corporation? What is the “warm glow” for corporations?]

Frame with public and new media reaction to what they did. (This is where green washing/pink washing comes in.)

[JP: See cases and find current examples.]

Chapter 3 | Value of shareholder wealth and how profit maximization creates wealth and brings countries out of poverty

Michael Fairbanks SEVEN Fund (look him up!): morality of profit, ability of bsuiness to, role of failure in innovative enterprise, relationship between private and govt and constitutents. 

William Easterly (NYU)

Sir John Templeton, wealth creation was no accident of history, whether for the nations of the West or for the billions of people struggling for basic necessities in the developing world. Human societies could experience general prosperity, he believed, only when they recognized and established broad principles of freedom, competition, and personal responsibility. For him, individual freedom was the indispensable foundation of economic, social, and spiritual progress. Check out this foundation. 

Bill Gates and Warren Buffet – invest in business and humanity. (CNBC – “Center of Capitalism”  – Columbia biz school. From 2016.)

Warren Buffett on Virtuous Organization type topics

“We’ll be the economic leaders. The question is will we be the moral leaders?”

Role of incentives (Wells Fargo)

“If anything is sufficiently anti-social, we should do something about it.”

“I am doing the things I love with people I love.” – “I stay healthy by being happy.”

Chapter 4 | How business can benefit employees

Probably something in sociology about the stabilizing force of organizations?

Also worker satisfaction and life satisfaction links, positive organizational culture, employee development, etc. make sure this is generationally sensitive since corps don’t work like they used to.

Chapter 5 | The social value of organizations

(sense of belonging, value alignment and augmentation, work on choirs by matt baggetta, etc.) (Community and employment for deaf – SF) (Howdy Homemade Ice cream in SLC – people with disabilities)

Hatch Chocolates (SLC – dwarfism. Not the strongest case.)Homeboy Industries (education/employment for former gang members, incarcerated,bakery business)

Chapter 6 | Supplier Benefits

 (I would start with the fair trade movement here. and labor unions. consider things like the high cost of low prices (walmart documentary).  Obviously look at things like sweat shops and international labor and these effects.

Chapter 7 | Collective Influence

 (I would start with the fair trade movement here. and labor unions. consider things like the high cost of low prices (walmart documentary).  Obviously look at things like sweat shops and international labor and these effects.

Chapter 8 | Markets and innovation

Maybe also some on market failures in innovation (think clean energy) and government intervention. How to incentivize innovation in all areas?

Chapter 9 | Collective Value

(the idea that teams can do things that people can’t. But not talking about collective bargaining. Just the pure value of being in a social group. Why go from an individual to an organization? those olde tyme readings are what we need here. Coase? theory of the firm? Maybe. Sociology?

Chapter 10 | How to Get Ideas or Products to More People More Quickly and efficiently

Something about the dispersion of new innovations. Clean air act. immunizations. Darron Billeter stuff. pricing strategy (economics of getting wide distribution of good things)

Chapter 11 | Sustainability and renewability of natural resources

Explore renewables and nonrenewables. cloth diapers as a case? sustainable logging? 

Chapter 12 | Beneficial Waste

Look for the orgs that use biowaste and turn it to fertilizer. Look at the impact of recycling programs. sustainable fashion. impact of pollutants. plastic. carbon offsets.

Chapter 13 | Institutional Knowledge

educational institutions. libraries. patent office. the internet. watchdog groups.

Chapter 14 | Customer interaction, customer interface, and customer service

treating people with dignity and respect in social services. USAA customer service. Nordstrom. the impact of automated phone systems. 

  • Skill (by JP) – reporting and transparency

Chapter 15 | Price setting

(living wage, low price as a differentiator, low price as a distribution mechanism, the ethics of profit margins, contract failure theory, approaches to reinvestment)

Chapter 15 | Corporate Citizenship

(tax evasion, citizens united, charitable donations, hiring local, manufacturing local, social capital, employee volunteer and giving programs, participation in the “community”)

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