Each cohort of the Creating Virtuous Organizations Initiative builds upon the theory already laid down by previous cohorts. This “Librito” is the most current synthesis of the theory to date.
This represents hours of collaboration, thinking, writing and testing by the 4 previous cohorts.
In this Librito you’ll find the principles that make up the Virtuous Organization, along the theory, ideas and practices we’ve developed along the way.
The following is a self-titled “brain dump” by Eva Whitesman when forming the concepts for courses for undergraduate and graduate students.
MPA 690R-003 | Creating the Virtuous Organization
MBA 693R-17 | Creating the Virtuous Organization
It is 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.”
In this class, we’ll explore and debate how companies can raise their total value by maximizing 14 specific virtuous value propositions – and prepare MBAs 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. MBAs can add this highly relevant, but rare depth of insight, to the vision and skills they bring to companies and organizations.
The virtuous organization
My current thinking is that a “virtuous” organization would have no negative accounts–they are at least zero (neutral) on all of these points, and should have a positive balance in at least one of them. That’s sort of the minimum. I think the goal, then, is to maximize the value by maximizing the individual items and raising the total value created by the organization.
There is, of course, a bunch of stuff already on virtuous organizations. See this search:
Social Value Propositions/Social Value Accounts
- Direct social/global/environmental mission (actual impact)-achievement of a direct and measurable positive impact in the quality of life of one or more constituents by providing products or services that yield this benefit directly. Alleviation of social guilt? If there are poor among us, or those with significantly fewer benefits, is that a problem? Something to do with the distance from the mean. See also profit maximization below. What about overcoming barriers that exist in normal market conditions? For example, hiring domestic violence victims or ex felons? What about something like direct benefit/indirect benefit/warm glow? Think of tax justifications. client/citizen/customer/donor/taxpayer distinction.
- Meet customer/client/citizen needs (traditional value propositions)-How is this different from the above? Is the only difference who is paying for it? If so, this drops off the list (or replaces the one above) but this bears some discussion. Is the difference needs vs. wants?
- Warm glow associated with supporting a mission-driven organization-opportunities to give and contribute to a meaningful cause create positive experiences for people who donate, volunteer, support, or participate in organizations that appear to share and champion their personal values (social/cause marketing). This is a benefit regardless of whether the organization actually creates a measurable impact on the purported area of interest. Secondary benefits of this approach may be consensus or critical mass effects in which social norms are shifted based on outward agreement with principles, values, or causes. This itself is something people will pay for–in which case it might be a customer (donor) want.
- Entrepreneur or shareholder wealth (profit function; raises available wealth and standard of living; trickle-down theory)-The return of wealth to entrepreneurs, investors, or shareholders demonstrates the ability of some organizations to raise the general availability of wealth in a community which can, in turn, create jobs (reinvestment, consumerism), and ultimately raise the standard of living.It certainly enriches those individuals and raises the standard or quality of life for those people–how is that different from raising the standard of life for clients? Does it have to do with the distance from the average standard of living? Some sort of equity argument here…think about wealthy people in impoverished countries. Why would that be corrupt or not achieve a social mission? A social mission probably implies some equinaminous approach to this, or the idea that the whole society benefits somehow from the enrichment of a few or a group? So not everyone has to benefit but the benefit of the few needs to raise everyone somehow…
- Provide benefits for employee/supplier (pay, benefits, employment, satisfaction, skills, actualization include valuing employees, not just transactional)
- Provide opportunity for social interaction (socialization, relationships, interaction, development)
- Collective influence (citizens united, collective bargaining, unions, collective impact)
- Collective value/critical mass-there are some things you just can’t do alone. Like play soccer. It’s not collective bargaining, and it’s not merely social benefit…or is it both of those things??
- Broad distribution of beneficial goods or services (improve quality of life)
- Sustainability/replenishment (is this a value proposition or a prerequisite of a value generating org???
- Beneficial waste-the waste the organization creates either has zero impact or positive impact. Like sustainable or replenishing use of resources, this might be a prerequisite.
- Institutional knowledge-keeping, safeguarding, and passing along information, ideas, approaches, techniques.
- Customer Service-human interaction and the opportunity for kindness and problem solving. It feels like a relationship because sometimes it is a relationship
- Price setting -prices reflect true costs of production, including living wages, fair prices, while providing customers with affordable products. This is a primary maximization problem. Is this the culmination of much of the other stuff? Does price setting impact and result from several of the other items?? I think yes…
- Citizenship. Paying a fair share for the resources that sustain you including government infrastucture and education. Local jobs. Dunno about this one…
- Virtuous network…not supporting practices of others (e.g. hotels and porn, accounting co.) also secondary functions like where you get your power and how you deliver products (packing, impact of shipping), etc.
- Evidence of harm (cigarette cos)
- Voice (internal? External? Feedback)
1. We spend a week 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.
2. Students work in teams to tackle assigned topics (not every team will tackle each topic). Their job during the semester is to do professional level work analyzing 1) the theory 2) case examples, and 3) the economics of business operations related to the assigned topic. Deliverables include 1) presentations 2) written analysis (draft chapters) and 3) evaluation metrics (ideally with completed rubrics and analytics for the case examples). These (methods and results) will be rigorously debated in class, and thus refined.
3. At the end of the semester, we vet our peer-refined work with professionals in the field. We bring in reps from a range of organizations and students present their work, analysis, conclusions, and rubrics. The reps question and evaluate their work. Afterward, we network and mingle.
4. Work that is good enough for inclusion in our book will receive acknowledgement by name in the book. In rare cases, chapter coauthorship may be granted. The trick here is to make the analysis really great, but to make the writing and rubrics basic enough that anyone could use the book-published version (though we might want to use a more high powered version of this for the back end in the consulting business). In most cases, I am expecting to have to rework the product but keep the ideas. Students whose work is used in this way will be acknowledged in the book (but coauthorship not granted).
If I have to teach some economics to make this work better, I can do that. But I am hoping we can just apply economic tools as appropriate that you have learned elsewhere…because teaching the tools takes time, and applying them to real stuff introduces ambiguity, especially when not everyone is working on the same problem.
I am also at a disadvantage because I don’t know what tools are taught in the MBA and which you haven’t been exposed to. Is there a hard skills list somewhere? Of stuff that is already covered? As I pre-think this, I suspect price setting (hedonic and other approaches) is going to be one of the most important concepts. Also predicted economic impact on emerging or delicate markets, which should employ stuff like monte carlo simulations. Then of course there is a variety of outcome evaluation and market analysis methodologies (conjoint, regression, instrument validation, etc.) that might come into play as we develop our rubrics.
In my ideal world, students would already know or be willing to learn outside of class the methods and approaches most likely to yield great evaluation metrics for the “virtuosity” of an organization on each dimension. Thus they would apply their hard skills (or acquire them as needed) to solve our specific problem of evaluating organizations along each of our 14 social value proposition dimensions.
At the end of all this, I want to know the following:
1. What are the main areas an organization should consider if they want to be “good” or “virtuous?” (we will either expand or shrink my list through debate and analysis)
2. By what standard would an organization know if they are bad, neutral, or good on each of these areas (develop and apply evaluation metrics)
3. What (high profile) organizations pass the standard for being “good” on each dimension, and which are “bad?” (applying evaluation metrics and refining through case application)
4. How can an organization use our metrics and analysis to go from “bad” to “neutral” or from “neutral” to “good?” (prescriptions that “move the needle” on our metrics)
My preference is to generate lots of amazing work product (i.e. book chapters) as a result of our work. But if the students need me to help them tool up in evaluative and analytic methods, we can do that instead…I just am not convinced we can do both to great effect. But if they want to bring their wide and varied tools from elsewhere in their education and *apply* them here, there would be lots of room for many different types of tools and skills, the application of which would only make our work product better.
So option A is I teach theory and skills but we get less work product, and option B is we presume most theory and skills and focus on application toward more work product.
- 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
“I live in the Managerial Age, in a world of “Admin.” The greatest evil is not now done in those sordid “dens of crime” that Dickens loved to paint. It is not done even in concentration camps and labour camps. In those we see its final result. But it is conceived and ordered (moved, seconded, carried, and minuted) in clean, carpeted, warmed and well-lighted offices, by quiet men with white collars and cut fingernails and smooth-shaven cheeks who do not need to raise their voices. Hence, naturally enough, my symbol for Hell is something like the bureaucracy of a police state or the office of a thoroughly nasty business concern.”
[From the Preface]
― C.S. Lewis, The Screwtape Letters
Behind-the-Scenes: Developing the Theory of the Virtuous Organization
The purpose of this segment is to draw back the curtain and show some of the “making-of” of the initiative, and hopefully encourage you to add your piece. The project is highly collaborative, relying on various diverse and often dissenting opinions.
The following is taken directly from class notes and subsequent correspondence with professors.
These are a few thoughts that your discussions inspired! I know there’s never enough time in class, so I wrote a few out.
TWO OBSERVATIONS AND TWO DEFINITIONS OF A “VIRTUOUS ORGANIZATION”
Observation #1: Endeavoring to classify a company’s product or service as “virtuous” or “vicious” leads down an endless rabbit hole of ethics that the legal system professionally tackles for us anyway.
(Example: McDonalds might be termed “virtuous” because it’s technically in the “family fun” industry. A cigarette company would not be “virtuous” because it’s life-threatening. However, heart disease due in large part to fast food like McDonalds kills more Americans every year than tobacco. Which one is more virtuous now?)
Big Potential Game Changer: What if we abandon trying to classify a product itself as “virtuous” and instead just be satisfied if it’s legal. If it’s legal, then for all intents and purposes it’s virtuous. Leave it at that. Professional legal debates go on all the time about if a product is okay for the market. Why would we try and re-invent that process? Just being satisfied with a product’s legality would save us time and free us up to move onto more concrete considerations such as…
Observation #2: What if we define a virtuous organization having less to do with the abstract internal values of a company and more to do with a company’s impact on social ills?
Check out this very well-crafted sentence by Alyssa:
“…instead of creating do-good off-shoots, take what [companies] are already great at and ensure it’s strategically aligned to benefit and grow the value system of employees, communities, consumers, stakeholders.”
“You take what you’re already great at” and do good with it.
That means that the company shouldn’t have to create a separate foundation, change its product line or even be less profitable for having donated money. AT ALL!! The company uses what made it great to maintain its profitability and at the same time lift the community.
Here’s a stab at the definition of a virtuous organization:
Virtuous organization: a profitable company or enterprise whose business model includes and relies on social impact in their major processes.
An alternative might be—
Virtuous Organization: a business or enterprise whose social impact is 1) tied to its profits and 2) inherent in its business model.
Okay, so basically there’s two parts to this equation:
The profitable company + the social ill = a virtuous organization.
(By social ill, I mean a problem with injurious consequences on society– poverty, prisoner abuse, illiteracy, human trafficking, etc)
Example #1: The Other Side Academy
Note: I know that this is a non-profit, but it’s a profitable non-profit whose business model demonstrates the above definitions.
The academy is a residential treatment facility where ex cons can go to change their lives free of charge. The company does not rely on any kind of outside funding and is completely self-sustaining through their business ventures. These include a moving company and a thrift store. The students are the sole employees of the moving company and the thrift store as an important part in their rehabilitation and training. Therefore, the more profitable the businesses are, the more residents the Other Side Academy can admit into their school. The company’s profits are tied to their social impact.
Example #2: Cotopaxi
Cotopaxi’s suppliers are farmers in Bolivia whose llama-farming craft would have melted into obscurity along with their income. Cotopaxi reduces poverty by providing a profitable product that demands their services. And there’s more to it than that, I’m sure, but you get the idea. The company’s profits are tied to their social impact.
And now for exciting BONUS material, haha — (SEE BELOW)
I went through the sheet of businesses and their mission statements and put few of them into buckets based on a quick google search regarding their social impact work. I’ve identified four possible categories.
(This was an idea that I got after listening to class on Tuesday and also approaches what we were doing with the spectrum today in class.)
THE SPECTRUM: Legally Okay (Level 1) —> Virtuous (Level 5)
Note: I didn’t even bother with anything before “legal” or “neutral” on the spectrum. We could just say that the companies that aren’t even legal definitely aren’t virtuous and probably never will be and just leave it at that.
Level 1: Profitable company, very limited social outreach.
- Universal Health Services has a foundation which donates to employees in crisis.
Level 2: Profitable company, but uses just its funding for outreach.
- American Express Foundation funds non-profits and other social causes.
- Patagonia provides grants to environmental causes
- Honest Tea partners with causes
- IKEA Foundation donates to causes around the world
- JetBlue donations, corporate volunteering, partnerships
Level 2a: Financial funding of nonprofits are linked to sales
- SweetGreen donates 1% to a cause based on every app download
- Nordstrom donates to various causes based on some brand sales
Level 3: Profitable company, uses its goods and services (strength) to promote a given social cause
- Warby Parker donates a pair of glasses to underprivileged people with the campaign “Buy a Pair, Give a Pair”.
- Zappos donates shoes and goods to school children
Services linked to their mission:
- Life is Good Foundation provides a health-professional coaching service
A Virtuous Organization
Level 4: Profitable company whose social impact is directly linked to its profits
- The Other Side Academy– rehabilitates multiple-offenders and ex cons
- Cotopaxi reduces poverty by employing low-income farms in Bolivia for their supply chain
These are very rough categories. Please also know that the research into these companies is very light and would require more.
“I worry about the world. I want to make six figures off my business and then donate to charities. Maybe I’ll even start a nonprofit.”
I’ve heard almost that exact phrase from many entrepreneurs. In fact, I’ve said it a few times myself. That is, until I realized something about this “wealth-to-donate plan.”
First, you have to understand that the wealth-to-donate plan traces back to Milton Friedman’s revolutionary and still largely influential assertion that the purpose of the firm is to generate wealth; then, the wealthy who benefit from the firms can distribute their wealth to others.
That’s a good plan, Milton — until it’s not.
For those dreaming of doling checks out to struggling nonprofits while relaxing in the cheetah-carpeted study of an Italian mansion, here are six reasons why that plan might backfire, and what we as entrepreneurs can do instead.
1. Some social problems can’t wait until you’ve made your millions.
Social issues like climate change, poor public health, unemployment, poverty, and crime are still growing. These issues might be irreparable in 20+ years. Take air pollution, for example: If we didn’t do anything about our filthy air quality for 20 years, the population might either already be widely bedridden with respiratory disease or already be dying anyway because of lowered life expectancy due to pollution. By then, it’s too late. A similar principle applies to social ills that attack certain subpopulations: a starving child can’t wait 20 years for their next meal; suburbs with high crime rates can’t wait 20 years for increased safety. Even small efforts in the right direction now can abate the darkness of a future in which our social problems are compounding upon themselves.
Try this instead:
Donate a percentage of your company’s profits now to causes you care about.
One business owner decided to donate 10% of his start-up’s revenue to charity forever. A commitment like this definitely has its drawbacks and unknowns, however, the possibility of alleviating a social ill now that could be irreparable in the future is priceless. Plus, being socially-conscious is a rising trend in businesses and a “must” in many circles. Your brand image could only improve.
If you’re still waiting for your company to be in the black, you might also consider donating a portion of your personal income. According to research, donors receive personal benefits like improved overall health, lowered stress levels, boosted morale, and improved overall life satisfaction and happiness.
Connect now with grass-roots efforts in your community.
Contact your city council, community leaders, and local non-profits for information on high-priority social causes in your neighborhood. Even minimal participation will help you engage with these urgent and local social issues on a grass-roots level and position you to be a knowledgeable. Social issues are complicated. Grass-roots level work will help you overcome biases and debunk misinformation that might exist in circles that are farther removed from the issue. Volunteering a few hours a week will enable you to stand in solidarity with others which will ultimately buoy them and transform you.
2. Some problems can’t be solved with money, so waiting until you can throw money at them won’t help.
Not to diminish the impact of a well-placed charity donation, but most social ills just can’t be solved by more money. Social impact for good often requires empathy, willingness, and grass-roots effort on someone’s part. And in its absence, no amount of money can substitute for human-to-human interaction: it is necessary/critical/of the utmost importance in solving deep-rooted, systemic social ills.
“Some of the most intractable problems we face as a society — addiction, homelessness, systemic poverty, mass incarceration and lack of access to health care, education and economic opportunity — are symptoms of other, more deeply rooted issues. “Solving” the root causes of these conditions requires more than capital. It requires empathy and a willingness to change the existing conditions that create the inevitability of many of these inequities.” — Carter Stuart, former federal prosecutor
Many impactful organizations don’t need more money; rather, they need more people. For example, The Other Side Academy, a residency vocational school in Salt Lake City Utah for the homeless and recently-incarcerated, is responsible for an impressive 98% rehabilitation rate. The residents learn practical life skills by running the school’s 3 businesses which in turn, completely cover the cost of their 2-year stay. TOSA’s biggest impediment in expanding all across the country isn’t lack of money; it’s lack of personnel. Their model relies exclusively on the influence of staff members who aren’t professionals or psychiatrists, but rehabilitated criminals themselves who were once in the same place as the residents. No amount of money could replace an influence like that.
Money can also worsen the social ill. Unfortunately, some well-meaning institutions and movements trade short-term solutions for long-term stability. Sometimes free handouts, welfare programs, and stipends foster dependance and victimhood instead of self-reliance. In these capacities, money does little to fix the psychological and systemic root of social ills, even though on the surface, such efforts might appear like progress.
For example, the solution to poverty doesn’t lie in poverty reduction with handouts or welfare checks, but rather wealth creation. Henry Hazlitt in his book called “The Conquest of Poverty” wrote that welfare programs often stunt wealth creation, as well as require exorbitant amounts of debt in the long run to keep such one-sided cash flow programs operating. The donation-debt cycle eventually results in inflation, causing a lopsided distribution of money in the economy, thereby hurting the poor even more.
On a smaller scale, passing off a $10 bill to the homeless on the street corner might make you feel charitable, but your extra cash likely contributes to a cycle of panhandling and illegal activity — the “business of begging” as a Utah news source put it. Many aren’t even homeless or as desperate as they portray. The benefits of making $200-$300/day on the streets outweigh the prospect of getting an honest job.
Try This Instead:
Donate to nonprofits that promote sustainability and self-reliance.
Vetting nonprofits and charities for scamming is an unfortunate necessity, but don’t stop there. Supporting organizations that promote self-reliance is what does long-lasting good in our societies. Here are some resources to do this: 3 Websites to Check before Giving to Charity.
If you’re in person, donate goods not money.
Seeing the homeless on the streets with their cardboard signs pulls at my heartstrings, and I don’t want to believe that they’re all scammers. Offering them food or paying directly for a bus ticket is a step forward in making sure we’re not enabling them. However, a donation to a shelter or a vocational school for the homeless could likely be better placed.
3. By focusing on social impact only after making money means that you might be contributing to the very problems you will eventually try to solve.
Walmart has destroyed how much of the environment, only to then try to repair the environment? Perhaps the environmental alarm clock wasn’t ringing as loud in the 60s when many of the business empires started. Perhaps they didn’t design their processes with the environment in mind. But if any of these massive corporations — Walmart, Target, Amazon, etc. — want to make a difference in the world, maybe they should just mitigate their traditional contributions to social ills.
It’s all fine and good if these corporations can in fact repair the damage they’ve done, but like discussed earlier, that might not be possible. Simply donating to charity doesn’t cut it if you’ve irreparably damaged the planet for everyone. Hope you’re listening, Milton — your plan that businesses only job is to maximize profit in the hopes that some of that profit might spill over later might not work in a global market with global ills.
Try this instead:
Create your business processes with social impact in mind from the beginning.
Perhaps if Walmart had used renewable energy sources back when they started, they wouldn’t be in the same trouble they’re in now. They might have been an asset in their communities not just with their product offerings, but in social good as well. As you’re designing your business, make it a habit now to integrate social impact into what you do everyday — your processes, your employee relations, your community. Social impact can happen THROUGH your business, not IN SPITE of your business.
4. You might fall out of touch with social problems when you’re wealthy.
Social and cultural barriers make it difficult to understand social problems at their roots. Top-down solutions come off intrusive, disconnected, and sometimes even damaging. Executives at the Other Side Academy, for example, complain that politicians don’t understand what their constituents need, and their campaigns land more people in the streets. Solutions are often only apparent from the ground level by someone who can see, feel, and understand the day-to-day situation of those involved. This was exemplified by a groundbreaking discovery about the poverty-to-prison pipeline: the issue wasn’t lack of educational opportunities or even lack of health care, children were near-sighted! Eyeglasses changed everything for some of those kids, and is not the kind of solution that would be dreamed up by an executive sitting in an office. The only way this worked was because people worked personally with those affected.If you wait until you’re wealthy, you’re choosing to hire other people to make a difference with your money, rather than being part of the solution yourself.
Likewise, unless you select a social ill that relates to your expertise, you’ll be entering a completely new industry to make a viable social change. Social ills are nuanced and complicated, built on generations of multifaceted issues. To make an active difference, you’ll have to understand the literature, catch up on the work already done, and network with professionals and organizations in the field. Such effort would be comparable to learning an entirely new language and culture. After 40 years of 60 hour work weeks, I wonder if such an effort would still be attractive.
Try this instead:
Volunteer time; not money.
Depending on your salary or earning potential, a few hours of time each week is a significant donation, especially compounded over time. Volunteering in person at an organization or on a cause will also give you an inside perspective to the effectiveness of the solutions presented. You might identify gaps that others might not see because of your unique experience and business background. Oftentimes, the sphere of social impact is dominated by individuals with a virtuous motivation, but perhaps lacking a business mindset. You could provide that perspective.
Start the habit now of collaborating with people outside your social status.
Find places where all members of the social ladder come together. Church groups are a good place for this. Community centers are another. Your very own business might be yet another. Do you employ people of a different demographic than you? What about your target market?
5. You’re squandering the impact you could have now with the great resource you already have — your business.
This is to say — Milton was wrong. We’re waking up to the fact that defaulting to personal donations won’t fix anything long-term. But this is good news. Profits and social impact don’t have to be mutually exclusive. This means that business isn’t the bad guy anymore.
People are waking up to business’s potential for social impact across the globe: [description of Oxford], [description of b-corp], [description of virtuous organization project].
Not only that, but millennials are increasingly anxious to be part of a business that has a social purpose. [expand]
Business has a tremendous social impact on employees, customers, and shareholders just by doing business. And they do it without third-party, non-profit partnership or unrelated charity initiatives. Their impact grows as their profit grows. Friedman would disagree with me, but I say it’s not only the rich philanthropists that have power to make social change.
Try this instead:
Combine your business’s social impact with its core competency, so social impact increases as profit increases.
Up to this point the narrative has been that for-profit businesses create the social problems, and then the non-profits and government bail us out. However, there is a new wind blowing. People are realizing that for-profit businesses have the power, if harnessed correctly, to be a greater engine for social change than any other force (don’t hate me, non-profits).
But it doesn’t stop there. Not only do for-profit businesses have the power to make the greatest social impact, but they can do without sacrificing their profits or productivity. The new way is to structure your business so that your social impact grows in proportion to your profits. The bigger your business, the bigger the good you do.
Patagonia is a business that’s started down this path. When selecting new factories for outsourcing, they take into account a vetting approach that considers social and environmental practices equally with quality standards and business requirements like financial stability, adequate capacity and fair pricing, as an alternative to relying on “sweatshops” where workers are treated in deplorable conditions. They’re contributing to the solution, not the problem, and the amazing thing? They don’t sacrifice their profits to do it. Take that, Milton.
Start with what you can change in your own business.
Jeff Bezos made a post on Facebook saying that he was going to donate $200,000 to charity and was asking for suggestions. People lashed back at him immediately saying he should just pay his workers a living wage.
Start with your own sphere of influence. What problems is your business solving already, and how can you capitalize on that? Here are some ideas:
- Diversify where you hire people from. Always hire the best candidate for the job, but maybe instead of hiring your buddies from college, post your job at the local community college, vocational school, or an area with a different demographic than yours. You could find a great and qualified hire, but just not have access to the same advantages your buddies do.
- Source your materials locally. Support other growing businesses instead of the giant corporations who may or may not treat their workers humanly.
- Humanize your interactions with your employees. Treat them like people, not resources. Take time to hear their feedback about your workplace. You’d be surprised what they say.
- Capitalize on the problem your offering is already trying to solve. Vivant, a home-security and surveillance system company, spreads the word that their systems can help families with autistic children. They raise awareness about autism, while providing a service that can help, while also growing their own company.
We can get all starry-eyed about the prospect of repairing social ills doing what you’re doing already with your business, but this isn’t to say it won’t require some sacrifice. For one thing, it requires a paradigm shift. We entrepreneurs must not only think about efficiency, but also think about social impact. We can’t only consider maximizing profits, but also maximizing social change. We can’t just think about offering a competitive product, but offering a solution to an ill greater than our business. We can’t just think about our target market, but we must think about our global community.
I and many others are convinced that the fate of this planet and perhaps the entire human race doesn’t lie solely in the hands of government programs, humanitarian trips, or 3rd-party non-profit arms of corporations: Our future lies in the ever-globalizing private industry. You want less unemployment and poverty? Foster entrepreneurship. You want a cleaner environment? Design your supply chain with renewable energy. You want to end racism? Diversify your recruiting. You want a better world for your posterity? Look no farther than your own business.
Milton Friedman was right: the firm’s social responsibility is to maximize its profits, but that’s only one half of the picture. He overlooked social impact.
A new mantra: The social responsibility of the firm is to maximize its profits while maximizing its social responsibility.
So for all you aspiring rich philanthropists out there… you don’t have to wait to do good until you purchase your own Lamborghini or hire a secretary for your secretary’s secretary. You’re sitting on a powerful engine of social change right now. For the sake of the global community, don’t wait to fire it up
WRITTEN BY Susie Hofheins
Every business wants to be successful. Maximizing profits and efficiently growing is a top priority for all companies. However, when success is the main focus, social impact usually is forgotten. Creating a positive social impact should be equally as important to organizations. It will elevate your business, give you higher purpose, create incentives for employees to work better, and ultimately make your business more successful. Many business founders and upcoming generations would agree. In an article published by Forbes found that millennials believe that business profits and social impact dont have to be mutually exclusive.
Sounds pretty nice right? Well it’s also not hard to do. You don’t have to change your products or entire organizational structure to start making a positive social impact. Social impact simply means meeting legitimate human needs. Every business plays a role in creating jobs and contributing to the communities in which they reside. In order to maximize their value created, companies must identify their signature strengths and align them with a virtuous purpose.
Step 1: Identify
Remember Maslow’s hierarchy of needs? According to the psychologist Maslow, every human has a pyramid structure of needs, where the lower needs must be met before the needs on the higher levels can be fulfilled. These needs include; physiological, safety, belonging, self-esteem, cognitive, aesthetic, self-actualization and self-transcendence. This hierarchy doesn’t just pertain to individuals. All businesses provide needs for their employees.
Businesses are very good at systematically organizing people to become more than the sum of their individual capacities. If a business is able to identify where they add value on the pyramid then they can maximize on the value they add to their employees lives.
There are also powers that each business can use to create social impact. For the purposes of this article, we have limited those to eight areas in which organizations can impart social good to: product employment, financial capital, power, leadership, institutional stability, coordination, and innovation. Every organization may be maximizing its power in one or more of these categories. In order to find where your business will be the most effective in terms of social impact, select one or two of these impact contributions to focus on.
For example does your company make products responsibly that are benefiting society and the world? Or is your business focused on finances and has leverage in the financial market? When combined with Maslow’s hierarchy your company can identify a need within your social impact factor that you can do a better job of providing for your employees, customers and communities.
Step 2: Make changes
Ok, so you do have to change some things. Change can be positive! Many organizations are already doing a lot of good for the employees who work for them so many times these changes can come in the form of improving on what you do best! For example if your business is focused on making products and you want to better help your employees and community fit their need for safety your company can focus on producing, selling or donating products that promote a sense of safety and stability. For example the Cotopaxi foundation was founded as a producer of goods but also with the mission to support global poverty alleviation and ensure that they will remain a dedicated B Corp by focusing on social good for their employees and community. By making these positive changes you will be able to focus your attention on the things that you will be best at providing needs for, creating room for your employees to reach their fullest potential and thrive.
Step 3: Re-evaluate
Social responsibility doesn’t just happen overnight, and you can’t expect to be making positive change for years to come if you aren’t willing to continue the evaluating process. Make sure to check back with these metrics often and do a thorough evaluation to make sure you are still providing positive results to your employees and to your community. Businesses that do not learn, grow, adapt and change are likely to face irrelevance and obsolescence as the rapidly changing social and technological organization can learn. Start one step at a time. Identify and make the proper changes to one area of social impact and need. Once you and your employees feel you are ready, choose another area to make improvements on. By taking the time to self reflect and work to improve you will help your business and ultimately your community become better.
For all of us ‘almost grown-ups’ who still don’t have a clue
“I just want to earn a livable wage from a job I enjoy, respect the company I work for, and feel like I’m making a positive difference in the world. Is that too much to ask?”
Cynics would say yes. Really, it’s not. At least, it won’t be in the near future.
There are so many movements happening right now. Corporate social responsibility initiatives continue to grow. Livable wage laws continue to develop and change. Organizations have begun to proactively address internal issues such as discrimination, pay gaps, and responsible sourcing. And progress will only continue as time goes on. .
In other words, it’s a good time to be a young, socially-conscious professional, and it’s not unrealistic to dream of a job where you feel like you’re making a difference in the world. While you can’t get step by step instructions on how to live your dream life, you can take a good look at the different types of organizations and how they fit in the fabric of our economy. With this understanding, you can choose how to position yourself to make a difference where you feel most needed.
So.. what are my options?
There are three main types of organizations: business, government, and nonprofit. As you figure out which of these quadrants you resonate most with, you can invest your energy and passions into the organizations in that space. Each of organization type has LOTS of sub categories, but for the sake of the big picture, we’ll just look at these big groups in the context of an economic theory that won Elinor Ostrom the Nobel Prize in 2009. This theory divides the economy into four sections and assigns each section a type of organization that is best fitted to provide and protect those resources.
(Quick side note: if you look for them, there are criticisms against every single one of these organizations. No, none of them are perfect, and yes, each of them are needed – just like us. We’re all looking to make the world a better place. Be aware of the challenges in that quadrant, but don’t let them scare you off.)
(For reference, excludable means if I have it, you can’t. Rivalrous means if I use it, it’s gone)
Businesses are responsible for producing private goods – items that have an exclusive owner. The capitalist market system in the United States suits businesses well – products are developed so people will buy them. If an item doesn’t sell, it’s because it’s unwanted or costs too much, leading the business to make changes. There is a wide range of private goods: the food we eat, homes we live in, cars we drive, etc.
Governments have the ability to pull resources from individuals living in a specific geographic region, or with a specific citizenship. As a result, governments are responsible for the goods everyone in that region has access too: public goods (law enforcement, national defense, rule of law), and common pool goods (timber, fisheries, clean water sources).
Nonprofits are designed to reinvest all company surplus back into the company. As a result, they are well positioned to provide club (or toll) goods at affordable prices. These are things that can take a lot of money to initially produce, but once it’s there, it costs very little (if anything) to give one more person access. These could be items like wifi, cable TV, and toll roads.
So where to go?
Is there a specific quadrant that’s speaking to you? If you’re interested in inventing flying cars, owning your own bakery, or writing the next best seller, business is probably the place for you. If you’re interested in ensuring people are safe, play fair, and have access to natural resources, government could be the way to go. If you’re interested in research and/or ensuring people have affordable access to important goods and services, nonprofit could be your life calling.
Made your selection? Great! Stay tuned for more articles coming soon that’ll dive deep into each organization type.
What if I’m not looking for a job?
You can still make a big difference without devoting 40 hours a week to these organizations. If you want to make a difference in business, remember what motivates them. Their purpose is to sell. If you don’t approve of their goods/services, don’t purchase them. Leave accurate, insightful reviews. These small, everyday actions make a big difference. If you’re looking to impact the government, be informed and vote! Send letters to your elected officials. Pay your taxes. Take a stand in social causes, and make your voice heard. If you’re looking to impact nonprofits, invest in those with causes that resonate with you. This could be an investment of volunteer time, promoting their platform on your social media, or making monetary donations.
The bottom line is this: you’re going to make a difference. You’ll impact the people and organizations around you, intentionally or otherwise. If you take the time to identify what matters to you, and act in accordance with those values, your chance of making a positive difference grows exponentially.
In August 2019, the Business Roundtable updated their definition and purpose of a business. In their revisions, the Business Roundtable asserts that businesses are responsible to all stakeholders for investing in them, enabling them to live with dignity and meaning, and actively engaging to fight issues of humanity. Less than a year later, the Association to Advance the Collegiate Schools of Business (AACSB) released new standards for accreditation. In July 2020, the AACSB’s release echoes a declaration of responsibility to stakeholders: “Business and business schools are a force for good, contributing to the world’s economy and to society, and AACSB plays a significant role in making that benefit better known to all stakeholders by serving business schools, learners, business, and society.” Compared tothe 2013 standards, much more is expected as, “societal impact is woven through all sections of the  standards.” Now, there are standards for Business Schools’ cultures and classes regarding Global Mindset, Diversity and Inclusion, Societal Impact, and Agility. These and other outlined values are gears that must be put in place as business schools evolve to prepare students for success as practitioners of the future.
The AACSB clearly calls for change: “[Business schools] must innovate and invest in intellectual capital; they must develop new programs, curricula, and courses; and they must continually update programs to ensure currency and relevance of the curriculum.” Corporate Social Responsibility courses and one-day lectures on Environmental, Social, and Governance (ESG) accounts will not cut it anymore. The changes that need to be made are just as much based on the culture of the program as they are the curricula–in fact, culture may carry even more weight. Keeping up with the new accreditation standards requires the unity in vision of administrators, advisors, professors, and students. The force for these necessary changes is coming from the outside in–from society, humanity, and planet–into the powerful institutions of businesses and business education. However, lasting changes come from the inside out–from individuals in businesses and business schools through the vehicle of their institutions, and back into society. In order to help these shifts in individuals, culture, and curricula, and to “accelerate innovation” as the AACSB declares, here are five courses that Business School Deans need to add to their course catalog if they are going to maintain pace and accreditation with the AACSB.
- Theory of Business
Need for it: One of the greatest shifts that is happening in business is surrounding general business theory and business responsibilities. A class about business theory will prepare students to engage more fully in the vision of a company and its impact in the world. Without this, the information students learn on theory will not be relevant.
Learning Objectives: Distinguish between outdated and updated business theories; determine the pros and cons of each, and explain why a shift in theory is necessary at this moment in history; and understand the nuances of the stakeholder-shareholder issue and theories to resolve them.
AACSB Standards: Agility; Global Mindset
Units: Capitalism (fundamentals of capitalism, conscious capitalism, stakeholder capitalism); Market Failure Theory; Shifting Roles of Business with a Focus on Stakeholders.
- Diversity in the Workplace
Need for it: A company must be ethical internally before it maximizes potential, profit, and impact. One niche of ethical business to focus on is diversity and inclusion. Diversity and inclusion in the workplace is crucial. Not only will it provide a safe space for minority students in a predominantly white male discipline, but it will facilitate understanding in the white male majority that can translate to diversity and inclusion in the workplace.
Learning Objectives: Learn about business through the lens of minority workers based on gender, race, and disability; learn to communicate about culturally sensitive issues and effective team building; learn to manage diverse opinions and experiences; and learn to fight institutional -isms.
AACSB Standards: Diversity and Inclusion; Global Mindset
Units: Minority worker experiences; creating and maintaining healthy work relationships; creating and maintaining healthy institutions.
- Social Impact of Business
Need for it: Gen Z-ers pouring into schools are increasingly concerned about the social issues of today and want to engage in conversation and action. Hungry for this information, students will go to universities that offer courses centering around social impact.
Learning Objectives: Learn how to measure social impact; learn to balance and work towards a triple bottom line (people, planet, and profit); understand how Environmental, Social, and Corporate Governance (ESG) criteria facilitate impact-conscientious investments; learn to engage in and facilitate community building and networking; learn about socially conscious business models like BCorps.
AACSB Standards: Societal Impact
Units: Measuring Social Impact; How to Impact Profit, People, and Planet on macro, micro, and mezo scales.
- Current Social Issues
Need for it: To maintain their relevance, business schools need to have a class that specifically discusses the current moment that their country or the world is in. Engaging in current social issues is critical to learn as a student. The real world does not wait for trial runs or ideas, theories, and action plans to be made. Having a Current Social Issues course will help students prepare to engage, learn, and respond in real time in their education. This will be invaluable for responding to social issues that arise when they are in the workforce.
Learning Objectives: Learn about the climate surrounding current social issues; engage in active discussions about how business can be a vehicle for change and movement; be able to create and evaluate plans for companies to engage in the moment on emergent social issues;
AACSB Standards: Agility; Global Mindset
Units: *varies upon semester* Current Issue Analysis (to get everyone on the same level of awareness); Compare and Contrast Responses of Current Businesses; Applied Theory/Response Plan Proposal
- Issues in Corporate Philanthropy and Responsibility
Need for it: As the Business Round Table’s purpose has changed to hold responsibility towards all stakeholders, it only follows that philanthropy in businesses will abound. By offering this class, the school will meet the expectations of the workforce by preparing students to engage with the past, present, and future of corporate philanthropy and responsibility.
Learning Objectives: Understand past and present issues in corporate philanthropy and corporate responsibility; consider the pros and cons of social marketing changing over time with green/pinkwashing; evaluate ways to improve corporate philanthropy.
AACSB Standards: Societal Impact
Units: Previous Corporate Philanthropy and Responsibility Overview; Current Social Marketing Trends; Stakeholder-Focused Philanthropy
These classes are filled with examples of the ideologies that business practice is moving toward. Some of these principles can be incorporated into existing classes. Be cautioned. A day’s lecture in finance on ESGs or in marketing on green-washing and pink-washing will not be sufficient to uphold the standards or the future of business. Progressive change must happen through innovation in classes and cultures. There must be a riveted focus on accountability to elevate Business Schools to a new checkpoint that they fall back to. Excusing yourself from making the necessary changes due to funding, time, resources, and other reasons that are presented very validly is the embodiment of what we are trying to move away from. The students that enter your classrooms, lecture halls, and now Zoom meetings are stakeholders. The population of society that exists near and below our country’s median socioeconomic status is desperate for economic bolstering, and through a trickle-down effect these individuals are stakeholders in how Business Schools are run. Disregarding this moment will perpetuate the struggle–the choice is yours.