Fifty years ago this week, Milton Friedman argued in The New York Times that business has only one “social” responsibility: maximize profits for shareholders. His perspective remained a gospel for many decades.
It is high time that we orchestrate and advance a refoundation of business and capitalism. Why? Because Milton Friedman’s exclusive focus on profit is dangerous, as it is at best short-sighted, as it ignores the side effects of business on society, and as it confuses an imperative (make money) and an outcome (generate a surplus due to great products and services sold to customers) with an end-goal. And because, in large part as a result of this excessive focus on profits, our socio-economic system faces a multi-facetted crisis: too few employees are fully engaged at work; social tensions are rampant around the world; and our planet is in danger. Business as usual is no longer working because an excessive focus on profits has led us to an impasse.
In my view, the necessary refoundation of business and capitalism has to be done around four key principles:
1. Fundamentally, companies are human organizations made of individuals working together in pursuit of a goal;
2. Philosophically, spiritually, morally, that goal for us human beings must be to contribute to the common good. Meaning, a business must be focused on pursuing a Noble Purpose, at the intersection of what the world needs, what the company is good at, what their team cares about as human beings, and how the business can make money;
3. Employees must be at the heart of business, creating and nurturing caring and authentic relationships both within the company and with the company’s stakeholders – customers, vendors, community, and shareholders, in a way that contributes to the company’s purpose and creates great outcomes for each of them;
4. Businesses must serve all of their stakeholders in an aligned fashion in support of their purpose and refuse to operate with a zero-sum game mindset, meaning they should refuse superficial trade-offs between stakeholders and relentlessly finds ways to deliver win-win outcomes.
In summary, we need a refoundation of business and capitalism around purpose and humanity. There can be no thriving business without engaged employees, delighted customers, thriving communities, and a healthy planet.
Over the years, I have seen from up close how this purposeful, human organization approach can create great outcomes. I have seen it at Best Buy as well as at several companies I have been involved with over my 40 years in business. When the company’s Noble Purpose aligns with the employees’ own individual search for meaning, it can unleash the kind of human magic that results in irrational performance.
I have two questions:
1) To what extent do you agree with the above?
2) What can each of us do to advance this necessary refoundation?
Please share your thoughts below for all of us to reflect on. I will share my ideas on the second question next week.