This is an excerpt of notes from Professor Eva Whitesman regarding defining the virtuous organization.
“Let them judge you, but remain virtuous.
Let them criticize you, but remain wise.
Let them misunderstand you, but remain kind.
Let them hate you, but remain exceptional.”
― Matshona Dhliwayo
There are a great many good people and organizations that share our vision: A world in which organizations are worthy of admiration.
Though we invoke the term virtue in order to suggest the highest possible standard of admirable performance, we have no interest in arbitrating among different types of values. We understand that values are always in tension, that different people value different things, and that values that some hold dear may be antithetical to the values of others.
What we do care about is value. A virtuous organization adds value to humanity by serving humanity’s most basic needs.
when we talk about organizational virtue, we are not talking about companies that embrace the same set of values that we would also embrace. Rather, our expectation of virtuous organizations is that they:
1) are organized in a way that contributes value to the world,
2) they know what that value is, and
3) they are true to it.
This book is for leaders in ordinary (and extraordinary) for-profit businesses.
This book is for people whose products or services are not necessarily viewed as obviously prosocial, charitable, or inherently “good” in any traditional way. We believe that it is possible for seemingly ordinary organizations to do extraordinary good.
We believe that organizations are living, breathing things. Just as cells in a body organize to create organs and systems, and ultimately a consciousness, we believe that organizations are more than the sum of the individuals that comprise them.
What we mean by virtuous organization:
- Organizations can be virtuous even if they are not “social businesses” or organized specifically to improve social welfare. We believe that all business can be a force for good.
- We believe that doing good is different from being good. We want organizations to be good.
- We believe that every organization can be more virtuous, no matter how good they already are. Virtuous organization is a developmental approach, always striving for more and better ways of organizing for more positive outcomes.
You don’t have to be a nonprofit, government, or social enterprise to be worthy of admiration. Business exists because it has the potential to create good in society. We want to help businesses–and business as a whole–achieve that vision.
Virtuous organizations do not form by accident, just as people of weak character cannot develop strong character overnight or without desire to change. Aristotle wrote that the “state of character arises from the repetition of similar activities,” which illustrates the purposeful transformation from being an organization that achieves good in an asystematic way to an organization that embodies virtue in every policy, practice, product and program.
When you hear the word virtue, what comes to mind? For some, it may bring up the classical cardinal virtues or some aspect of religious piety. For others, perhaps the concept of virtue ethics or an image of a saintly someone you know. Regardless of what you think of immediately, we’re guessing that business isn’t the first thing to come to mind. In fact, it may even seem to you that virtue and business are incompatible. We’re here to change your mind – and show that virtuous organizations can exist, what they really look like, why they matter, and how you can lead, create, or be part of one.
Perhaps you’re thinking that organizational virtue sounds a lot like corporate social responsibility. In a way, you’re right – virtue involves using organizational resources to make headway in reducing negative externalities and improving opportunities for vulnerable people. Much of this is covered in social impact functions in leading organizations today, and we salute their efforts. But alone, CSR is not enough. It can’t mitigate negative people practices internally or save a business that has unethical or dehumanizing practices deeply entrenched. Virtue is about a comprehensive identity for good within and without an organization – a consciousness of contributing more to all stakeholders. And an acknowledgement that the why and how of an organization matter as much as the what.
At its foundation, virtuousness is about congruence. Congruence in the mission, values, practices, products, leadership, philanthropy, and culture of an organization. Too often, CSR has been hijacked as a tool companies use to rehabilitate an image after a damaging scandal or when they garner criticism for failing to “give back” after having received so much from a community.
Whether you’re an idealistic student, a budding entrepreneur ready to build, or a seasoned decision maker in a large organization, this book is for you. We each have a role to play, and the great thing is that we can start where we are. This book is primarily aimed at organizational-level decision making and how individuals can use these principles to move organizations to a greater sphere of virtuousness, wherever they start.
Becoming a virtuous organization is not something that just happens overnight (even for organizations just starting out). Creating a virtuous organization is an evolving process that takes time, commitment, and dedication. As you read this book, if you find yourself becoming hopeless or overwhelmed, take a moment to breathe, remove judgement, and be present with the fact that by even picking up this book and reading it, you are taking the very first step to making your organization better.
I am writing this book because I believe there are so many noble and generous solutions in the private sector. There are synergies and efficiencies to create and expand. And there are people to help. This book will be a success if organizations use their capacity to create a more virtuous landscape for their employees, consumers, stakeholders, community, and the planet.
Collectively, when we tried to grasp hold of an endpoint–a single definition of what it meant to be virtuous or good or noble as an organization–we quickly found ourselves mired in impossibly diverse contexts, conflicting value sets, and irreconcilable debates. But when we focused on principles, with the central concept that any organization could improve, and that any leader within the organization could implement certain key ideas that would bring about that improvement, we all clearly saw the vision for a way forward.
It’s tempting to look at these stories and say something like “doing the right thing pays!” For those of us trained to see things in terms of cause-and-effect, certainly these results matter. They signal demand for good practices in the world of business.
But there is a deeper message: It is possible for an organization to be good.
There is a common misconception in our society that nonprofit organizations and social enterprises are naturally virtuous and traditional for-profit organizations are more inclined to be non-virtuous. In fact, as one member of our team sought to transition from the nonprofit sector to an impactful role in the private sector, she frequently found people asking her why she was giving up on her values and moving over to the “dark side.”
All organizations have the potential to be either virtuous or non-virtuous. We’ve witnessed inhumane layoffs in small, local nonprofits and meaningful mission alignment in large multinational corporations. We’ve seen value-driven decisions and seemingly value-absent decisions in every type of organization imaginable.
Necessary evil trap
Sometimes a whole system has been built around a product or service that causes harm in isolation. The problem is that removing the harmful item would also cause the entire system to crumble, causing more harm in the remedy than in the ailment itself. The trap is that we fool ourselves into believing that this paradox requires that we accept the necessary evil as irreparably ensconced in our system. Just because it would take a great deal of effort by many people over a long period of time does not render a task impossible, nor does it decrease the value in making the effort.
So how do we deal with a necessary evil? The first thing is to create alternatives. Options create choice, and one of the core principles of the virtuous organization approach is to honor agency. By working to create alternatives to the necessary evil—usually through active innovation.
The next step is to introduce viable and less harmful alternatives to the product mix alongside the necessary evil. For example, companies that rely on fossil fuels to power our economy can introduce ever more sustainable alternative energies to their product mixes.
Almost universally, newer technologies are more expensive than existing ones. Often, the cost of new infrastructure and not-yet-optimized processes result in higher prices, disincentivizing the introduction of newer, less harmful technologies to the product mix.
The key is to decrease the price of the new technologies—at a loss, if necessary, subsidizing with other products—in order to stimulate demand. And increase the price of the more common but harmful technology. This better reflects the full social cost of each product, and the increases in cost for the harmful product will both subsidize the new technology and incentivize more early adoption demand for the more sustainable, less harmful product. Essentially, you would be subsidizing the new tech with the old tech, while taxing the old tech. Internalizing the regulatory
The third way principle—create alternatives
The accounting trap and the do no harm principle
In dealing with tradeoffs, one of the challenges we run into is the accounting trap. Generally in accounting (and this is a gross oversimplification), deficits in one area of a business can be offset by credits from a different area of the business. If we experience losses in the pants division of our clothing company, for example, but our shirts division performs particularly well, the revenue from the shirts may cover the deficit in pants sales, and our company overall may still have a positive financial balance at the end of the day.
The problem with applying accounting methodologies to our calculus of virtue, however, is that no amount of philanthropy or community engagement can cover a deficit in environmental harm, or make up for systematic discrimination, or repair corporate violations of the public trust.
Too often, philanthropic and prosocial efforts of companies have sought to make some form of reparations for the harms otherwise created by the organization. As though the company is trying to purchase goodwill, forgiveness, and redemption.
If we are accounting in value terms and not in money, it makes no sense to continue supporting parts of the company that continually yield deficits—rather than credits—in the good they create for the world. Particularly since in accounting for value, good cannot overcome harm.
Utilitarian calculus would suggest that so long as we produce enough good in one area to outweigh the harm in another, we’re in the ethical clear.
But virtue ethics suggests that there is no balance between harm and good—we want to become the sort of organization that does no harm, and maximizes good. It’s not about the end result, it’s about the integrity of who we are as an organization, and who we want to become.This suggests that to overcome the accounting trap, in any area of endeavor, we must adhere to the do no harm principle. We do not offset harm or justify harm or buy our way out of harm with other good works. No, we work toward remedies that will reduce and ultimately eliminate the harm we have created in any and all areas of endeavor. In other words, we need at least a zero balance in all of our accounts from everything we do as an organization. And if we aren’t there yet—if we have a negative balance in some area from the harm we are generating—we need to actively work on remedying those problems.
Want to read more?
- Influence | Creating the Virtuous Organization
- Mobilization | Creating the Virtuous Organization
- Leadership: Exemplar | Creating the Virtuous Organization
- Power: Great Responsibility | Creating the Virtuous Organization
- Reporting: Open Book | Creating the Virtuous Organization
“You need to have a culture instead of a payroll so that people watch themselves. What does this? Not money, but enhanced self-esteem.”
— Steve Wynn