Toward Becoming a Great Corporation. Part One

Corporations come and go. Some go under totally. Some get swallowed up. Few become and last as truly great corporations. And those that get anointed as truly great often embarrass the anointers not long afterwards. That’s why I never anoint any.

I’ve been studying corporations and other organizations for more than 50 years. I want to distill and share with you what I have learned. Not to do so would be a waste. I have honed such a vast amount of “nuggets” that I must divide this article into five parts, with one for each of later issues. In this introduction I give you some introductory concepts and principles. At first glance they may seem academic and/or naïve. They are anything but on further reflection. In the other parts I will address four elements necessary for a corporation to become great: a great board and executive team; a “lowerarchy,” a great culture, and a great way to manage performance, not people. Needless to say, any corporation seeking to become great must also continue to thrive in the marketplace by having the right products and services that sell. These marketplace essentials are beyond the scope of my articles. That’s not a cop-out, simply an acknowledgement that my storehouse of knowledge goes only so far. At the same time, mastering the four elements ought to put market place goals in easier reach.

The Essence of Corporate Greatness

Consistently Positive Behavior + Consistently Positive Results

Corporate greatness is more than money deep. I once dug into the records of some money-deep corporations. What I found wasn’t pretty (e.g., breach of contract, outright fraud, etc., etc.). They were awash in what I call “vulgar” wealth. Mind you, I’m not being moralistic, and I would point out that “boomerang” harm from corporate wrongdoing and positive ROEs (return on ethics) are very real phenomena.

The Gold Standard for corporate greatness is to do business consistently in a positive manner in consistently producing positive results. It may not read like an ideal standard but it is. I challenge any corporation to meet it. I doubt if it will ever become the norm. Yet, I argue that it is every corporation’s obligation to itself and to all of its stakeholders, including the environment and to society at large to do no harm and to seek greatness whether it ever reaches the ideal. Doing no harm yet failing to reach greatness, no small achievement itself, ought to be considered a grand “consolation prize.”

An Unconventional Bottom Line

The conventional bottom line of business we all know about, the bottom line of results. The unconventional bottom line, which I call the “bottom line of behavior,” is not so familiar. Try to picture it as three-in-one bottom lines. One divides competent from incompetent behavior. Another divides motivated from unmotivated behavior. The third divides ethical from unethical behavior. All behavior below any one or more of these lines fall far short of what ought to be expected of any corporation and automatically rules out its being considered great regardless of how great its conventional bottom line might look.

Positive results can never be reflected in any set of financial measures. Achieving positive results does not require achieving double-digit growth in financial returns every year or maximizing shareholder wealth. Both of these goals are a sure invitation to corporate wrongdoing. Positive results are those that create a positive, multifaceted, and multidirectional value. The value is positive because good benefits have been provided without knowingly causing harm. The value is multifaceted because the benefits aren’t just financial ones. And the value is multidirectional because the benefits are not just limited to shareholders and bonus recipients within the corporation.

Nature of Corporate Success and Failure

One way to think of the conventional and unconventional bottom lines is to think of the difference they make when combined in how success and failure are managed. From the perspective of the first bottom line a success is a success because the desired results are gotten, and a failure is a failure because the desired results are not gotten. All successes are rewarded. All failures are penalized. That’s how the notion of success and failure is sometimes treated in corporations.

Since corporations obviously cannot survive on just their good behavior (nor can Broadway survive on just good acting without enough paying audiences) the practical implications of the unconventional bottom line are mostly in its merger with the conventional one so that the positive and negative dimensions of corporate behavior are taken into account in considering the extent to which corporate goals are met. Adding the two bottom lines together gives a totally different picture of success and failure and allows for the total management and accountability of corporate performance. This merger conveys a truth learned in childhood and often neglected in adulthood. Not all success is good, particularly ill-gotten success, where the ends justify the means. Not all failure is bad, particularly failure where all three kinds of behavior behind it were well above their own respective bottom lines.

This old truth needs to be revived and made a prevailing creed and practice throughout the corporate world. It is obviously a truth hard to honor in practice. It requires not only the acceptance of positive failures but also the willingness sometimes to reward major risk taking efforts that fail despite plenty of competence, motivation, and integrity that went in to the efforts. While positive failures do not reflect greatness, they can help set the stage for it. Consider, for instance, a company that rewards the members of a project team that spent millions, their talent, and their energy on a worthy gamble that failed due to totally unforeseen circumstances. Such a company wisely knows that the same positive efforts, not being dampened, may very well succeed the next time.

The old truth also requires intolerance of all negative successes and the additional moral courage to penalize the ill-gotten ones, which helps to explain why the old truth is not often seen in action. Consider, for instance, an executive who fires the manager of the leading sales division because he was unscrupulous. Such an executive is more resistant to the conventional bottom line and its pressures and less tempted by its promise of rewards. Would that all corporate executives matched this exemplar.