In Part One I introduced the ideas of the great corporation and the Gold Standard. With these ideas as a framework I will use a hypothetical corporation to illustrate how a real corporation might start on its journey to greatness. The hypothetical corporation has a board that is not “warped” (e.g. not stuffed with the CEO’s sycophants) and does not have a CEO with character flaws (e.g., imperious and rapacious) and they are determined to “turn up” (turnarounds are too often “circular”) the corporation and its performance. To do so they start with a series of meetings to do some reviewing, rethinking, and planning that lead to breaking away from most if not all conventional norms common in the corporate world.
The meetings are guided by a new protocol. A director, not the CEO leads the meetings. There is an expert facilitator. Domination or intimidation by anyone is not allowed. Open mindedness, candor, and respect for differences of opinion are encouraged. To discourage groupthink, members ensure there is someone to be the devil’s advocate. Input is gotten from the largest shareholder, a workforce representative, the largest supplier, the largest customer, and one or two public officials from the community where the corporation is headquartered and/or has its biggest operations. While new directions are authorized at its “top,” a great corporation would not act autocratically or unilaterally.
Reviewing the Corporate Performance Equation
Great inputs beget great outputs. Reviewing and filling in the details of both sides of the corporation’s performance equation will give a good assessment of what the current status is and will stimulate much thinking about the changes needed to become a great corporation. Every real corporation, not just a hypothetical one, has the same generic performance equation:
Corporate Inputs + Situational Inputs = Behavioral Outputs + Result Outputs
It is the first agenda item in the series of meetings. The corporate inputs assessed include three corporate basics; decision making; corporate leadership, power, and control (all discussed shortly); operations; personnel; organizational structure; corporate culture; and the way performance is managed (the last three are discussed in the last three articles in this series.) Among the situational inputs assessed are the investment community, the marketplace, and government (also discussed shortly). From this left-side assessment an “input scorecard” is created that will provide a benchmark for evaluating progress from this point forward in making changes in corporate input.
Assessment of corporate outputs is quite unlike a review of facts and figures about the corporation’s financial performance. Instead, an “output scorecard” is created that reflects an assessment of the “four quadrants of performance;” namely, positive successes, positive failures, negative successes and negative failures (these differentiations were introduced in Part One). This scorecard will be the benchmark for evaluating progress from this point forward in “accentuating the positive and eliminating the negative.”
Reframing Three Corporate Basics
The first is corporate purpose, or the “who we are and why we are.” Purpose affects corporate performance and how it’s managed, is the root of the corporate vision, and influences the corporation’s values. A new purpose is articulated that reflects a seeking of the Gold Standard by using corporate resources in positive ways to serve all appropriate stakeholders. The new purpose will steer the corporation around the conventional norm of seeking to maximize shareholder value, a myopic, narrow-minded pursuit that inevitably sacrifices integrity.
The second is corporate vision; “What would we like to see ourselves become and do in, say, ten years from now?” To be consistent with the newly framed purpose the answer is something like “we want to become a great corporation providing/producing XYZ and meeting the Gold Standard in doing so.”
The third is corporate values, or “what is really important to us.” There are two fundamental kinds of values, instrumental values and end values. Instrumental values speak to one part of the Gold Standard, the manner in which ends are pursued. End values speak to the other part, positive results consistent with corporate purpose. There is consensus in the meetings that both positive success and positive failure will be valued and that negative success and negative failure will not be valued.
Altering the Stance toward the Marketplace
Abstractly, a corporation’s context is situational inputs from outside. They interact with inputs inside to determine corporate performance. Concretely, corporate context means the marketplace and government. They are the primary sources of opportunities, pressure, and temptation from the outside.
One of two dominating elements of the marketplace is speculative investors. To treat them as the “owners” of corporations in which they invest is laughable. The decision is made to do some very targeted stock marketing aimed away from speculators, to stop issuing forecasts and reports of quarterly earnings, to interpret the state statute about directors’ fiduciary duties more broadly and creatively, and to explain to the investment community the rationale for the corporation’s new direction and long-term orientation.
The other element is globalization. It is very controversial, meaning different things to different people and affecting them differently. In its simplest sense, globalization means the presence of and imprint on other countries by another country’s agents. Globalization is controversial because of its imprints. Some claim their net effect is positive, some say negative. Being a multinational corporation it is decided that every decision and every corporate operation must aim toward reducing, not increasing the corporation’s negative imprint.
Altering the Stance toward Government
Like mother and infant, government and big business need each other. Government at all levels and branches has been corrupted into becoming a reliable and lucrative patron of corporations. Corporations benefit from constitutional rights not intended by the Constitution’s framers; corporate welfare; favorable legislation and regulations; and meaningless public accountability for corporate lawlessness. It is decided that the corporation will forswear political contributions; lobbying; and government hand outs; and will widely publicize all its new self-reform policies in the political arena and enjoin its competitors to do the same.
Creating a New Perspective on Corporate Leadership, Power, and Control
Corporate leadership, power, and control all require a different perspective and a reorientation consistent with the Gold Standard and the idea of corporate greatness. The changes planned include democratizing decision making (coming up next), lowering the hierarchy (Part Three), creating a “performance-first” culture (Part Four), and the way in which performance throughout the corporation is managed (Part Five).
Democratizing Decision Making
Many if not most momentous corporate decisions (e.g., deciding to acquire another company) end up as failures and do so not because of unexpected events but because of the decision makers and their way of making decisions. In one or more of the meetings, therefore, the record of momentous decisions made, who made them, the process followed in making them, and their outcomes are reviewed. Particular attention is paid to the authoritarian nature of executive decision making and the narrowness of the perspectives leading up to the decisions. It is concluded that decision making should never be the same again. How can it be when the top is no higher than the peak of a “lowerarchy,” no longer the sole source of momentous decisions, and when all decision makers must bear in mind the Gold Standard and the vision of becoming a great corporation? To take one very simple example; no longer will there be decisions allowing the punishment of positive failures or the rewarding of negative successes.
A hypothetical corporation is not make-believe. It’s more like a hypothesis that can be tested. And it is already being tested. Some real corporations exist that have actually broken away from conventional norms comparable to what I have just written about in this article. At the same time, I readily acknowledge that the journey to corporate greatness will perhaps always be the path less taken.
© 2009 – 2015, Gary Brumback. All rights reserved.