How Great Companies Think Differently

How Great Companies Think Differently

Rosabeth Moss Kanter

Professor Rosabeth Moss Kanter of Harvard University is one of the most progressive thinkers in contemporary management. In this article she explains how companies that go beyond the myopic profit-driven bottom line, can reap rewards in a sophisticated global economy. In essence, it’s the 3 Ps of people, planet , profit, with a twist. She insists that firms that focus on the long-term are sustainable institutions with deep and long-lasting roots.

Moss Kanter takes exception to the narrow view that reduces the role of management to the maximisation of shareholder value. Business is part of society and should not be disconnected from it through an insular focus on profits. At its best, business is part of the fabric of society, like religion or culture.

Great companies have what Moss Kanter calls “institutional logic”, building resources in order to endure. She describes six facets of institutional logic: common purpose, a long-term view, emotional engagement, community building, innovation and self-organisation.

In talking about common purpose, Moss Kanter highlights Pepsico’s Performance with Purpose programme, which seeks to orient the business towards more sustainable products. The appointment of a global head of health and a commitment to eliminate sodium and sugar from the diet was a key driver for this project. Such approaches can re-engage employees with the core purpose of the organisation and also drive sustainable financial value and shareholder return.

This links to another aspect of “institutional logic” – the long-term view. Moss Kanter’s cites Korean bank Shinhan, whose deferral of a culturally and politically sensitive bank acquisition in the 90s contrasts with the heady decision-making of organisations such as Enron, and the resultant corporate crises. Banks like Standard Chartered emerged in better health because they were not hypnotised by short-term shareholder value. (In the CIPD’s own Shaping the Future project, Standard Chartered Bank’s “Here for Good” programme was shown to connect its employees worldwide.)

As Moss Kanter points out, the real test is whether employees can commit emotionally. She contrasts this with the desiccated economic rationalist view which permeates many motivation theories. In an example of emotional engagement, she discusses how P&G connected its employees with infant mortality issues in Africa. The emotional commitment of local managers helped to build sales of the company’s key brand, Pampers. To be honest, I feel Moss Kanter’s veneration of P&G’s Africa policy, which could be seen as a marketing strategy, devalues the concept. It needs to link much more to issues outside global brand strategy where it is “giving back” rather than building market share. I think HR has a questioning role to play on these kind of issues and at least address potentially harmful claims of doing good when firms are simply doing business.

Moss Kanter believes that firms can help to tackle those perceptions through community building. She argues that globalisation means that companies have to put down roots in local markets by engaging with local communities. Companies that adhere to institutional rather than a profit-maximising logic can cultivate relationships with public officials and communities. It helps to counteract the rootlessness that often attends globalisation. This is essentially a form of corporate responsibility (CR) and isn’t entirely altruistic. It can and does drive benefits for the companies concerned. IBM, for example, has built brand and profile in China by harnessing its considerable consultancy and technology resources towards developing evidence-based local medicine. But, nevertheless, linking with local communities is a key part of how great companies think differently.

Thinking differently is also key to innovation, another aspect of great companies. Innovation is unleashed by the idea of common purpose, according to Moss Kanter. She talks of the Mexican cement company CEMEX whose development of antibacterial concrete came from an innovative approach that focused on unmet needs and subsequently became profitable. This is also an approach being used by pharmaceutical companies as they seek to expand the sustainable market for drugs and medicines. Institution building creates an ecosystem that sparks business innovation. It is also critically important to work in a sustainable way when developing this approach.

Finally, great companies trust talented people to deliver, says Moss Kanter, in describing self organisation. They reject the idea that people are “self- interested shirkers” or robots to be commanded. People decide whether or not they deliver discretionary effort, and firms that have an institutional logic are more likely to be able to harness this. Great companies ensure that formal structure and reporting lines are relaxed or even dissolved to allow ideas to flow. It’s self evident that rigidity stifles innovation. Empowered employees can innovate freely and meet society’s needs.

Moss Kanter’s article is a useful rallying call for those who want their companies to operate on a more long-term and sustainable basis, and she helps drive debate on the purpose of business. The CIPD’s own Shaping the Future project, and joint work with Tomorrow’s Company shows many organisations are already addressing these facets of institutional logic, such as common purpose and the long-term view.

Originally published in Harvard Business Review November 2011

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