Last week, I had the honor of speaking at an international business conference on “Profits and Social Values: Closing the Gap” put on by Fundacao Dom Cabral, a leading business school in Brazil, ranked #8 globally the past three years by Financial Times. FDC regularly puts 30,000 people annually through its programs, many of them going through customized programs developed directly for clients companies.
The conference featured speakers, including yours truly, from Europe, Asia, South America and the U.S., all addressing the topic from their own experience and perspective.
The theme was about the gap between what corporate boards (and thus top management) focus on (the bottom line) and social values (as described, for example, in terms of disparities in income and quality of life). The big question was: what should/can we do about the gap?
One of the most striking presentations was from Pedro Luiz Passos, founder and chairman of the Board of Natura, a “most admired” Brazilian cosmetics company founded in 1969. It operates in several Latin American countries and in France. Passos talked about the importance of relationships – built with their sales staff (independent “consultants”) as well as with customers.
What struck me was that, though he could have easily talked about the company’s products and markets, he was pointing instead to the “building block” of the company – relationships. Yet most traditional companies focus on profits – and thus, thanks to the way accounting works and the way the traditional leader’s mind thinks, about transactions. The traditional corporate profit formula is about
a) the number of transactions,
b) the size of the average transaction, and
d) the profitability (profit margin) of the average transaction.
Maximize the “product” (a * b* c) of these factors, and presto, you get total profits. So the traditional business leader is trying to increase the size of a, b, and/or c – and thus is focused on transactions – to maximize profit.
But Passos was talking about building the quality and strength of relationships. Profits (and a, b, & c) come out of those relationships. That puts the focus where it should be. And, in the process, naturally addresses social values.
One of my purposes in going to Brazil was to see what company or companies from South America I might consider including in my next book, tentatively titled Origins of a New Corporation. I think I found that company in Natura.
My main purpose, of course, was to speak and thus share my perspectives with the audience of over two hundred business (80% of the audience) and government and non-profit leaders. In brief, here’s what I shared:
- That much of my early career, I straddled the “gap”- with my “day job” being involved with the corporate world, helping them achieve their objective of profits – that’s where I put my mind to work. But there was this other aspect, call it social values, where I put my heart to work.
- This other dimension included: Starting with my minister in 1981 for business executives in our church a group which we called “Christianity in Business” to explore what it meant to put Christian values into action in business situations; then later getting involved in socially responsible business organizations and speaking at various SRB groups; then also speaking at several Spirit at Work conferences.
- Increasingly, in the last ten to fifteen years, I felt that gap diminishing – in my own work at least – particularly as I saw the connection between Capitalism and serving Humanity. (Much of this is described at www.HumanCapitalism.org.)
- The book I wrote that Cosimo Books published in 2008, NOBLE ENTERPRISE: The Commonsense Guide to Uplifting People and Profits argues that companies that act with nobility will create a winning competitive advantage.
- In that book, I identified certain “inner” sources of competitive advantage which could power a company’s performance, whereas traditionally, companies have relied on “external” sources of competitive advantage.
- I called these inner sources of competitive advantage Spiritual Capital (which is described both in the book and at www.HumanCapitalism.org).
The bottom line that I was suggesting was that the so-called “gap” was an artificial construct (caused by defining the corporation in a narrow, historical way) and that when one “connects the dots” and sees the larger definition of business, one sees that social values are part of that. Furthermore, I have chosen to focus on those leaders (and companies) who see and act on this.
I see my purpose as one of inspiring business leaders to explore and adopt this larger view of the corporation, and to provide them with compelling examples of other business leaders who are already doing that, in the process serving social values – and generating superior profits.
Judging by the enthusiastic response of the audience and the conference sponsors to my message, it seems this message rang true.