There’s a powerful, lasting myth about business that I’ve made it my life’s calling to debunk: the idea that companies pursue the right thing to do (good karma) at the expense of profits (good business). That false dichotomy is just plain stupid.
Yup. I said it, and I’m not taking it back.
Yes, you can build a business empire based on really, really bad karma. You can be an absolute tyrant, a modern-day robber baron, a Mr. Burns type, a horse’s ass, and you can dominate your market or even become a billionaire. No names here – you can fill that blank in yourself. And it’s still possible to be a financial success in the 20-teens that way.
But it’s harder. Bad karma is actually a drag on a company’s profits, at least over the long haul. Think about it:
- Abuse your customers and they will only remain with you until an attractive alternative comes along. Then they’re out the door, and you have to slash your prices (and profits) or spend inordinately on slick advertising and aggressive sales pros to find new suckers.
- Abuse your employees, and the most talented prospects out there will pass you by entirely. Those few people of superior talent who you dupe into working for you will eventually wise up and leave, sticking you with the leftovers. Can you win a game with a bunch of also-rans? Sure, it happens. Can you build a dynasty that way? You tell me.
- Abuse your community, and you’ll breed activists who will protest, boycott, and drag you into court. Again: costly, costly, costly.
- Abuse the law, and sooner or later you’re bound to get busted. Even if you survive the penalties, those fines and your legal defense are both costly – another drag on your profits.
In this Social Age? Each of these factors is accelerated a thousand-fold. And folks, social is still in its infancy. Just wait. You’ll see what I mean in no time.
Leading through fundamental human values
Is it really easier and more profitable to wear a white hat, to sow good karma?
- Ask VALVe’s Gabe Newell, who pays his employees much more than market rate for their talents, has not one manager (including himself), and thinks outsourcing is stupid. Gabe is worth $1.5 Billion. I couldn’t imagine competing with his video gaming firm. I actually pity those who have to.
- Ask the leadership at Southwest Airlines. They work as respectful partners with their multitude of unions. Ever see an American or United pilot help clean out a cabin after a flight, to turn the plane around faster? It’s commonplace at Southwest, even though that type of thing is expressly not in their pilot’s union contracts. Southwest has been profitable every year for forty years. Every year.
- And look at Parnassus Investments. Established in 1984, Parnassus outperforms the market year after year by investing in ethical companies. Here is just a bit from their “How We Invest” page:
“At Parnassus Investments, we follow a responsible investment approach to understand the full impact of a company. We carefully consider a company’s environmental, social and governance (ESG) factors. By incorporating ESG factors into our fundamental investment process we often identify risks and opportunities that the market may have ignored, and identify responsible companies.”
People AND profits.
I’ll be sharing more about this remarkable company in the near future. For the moment, let me leave you with this: You can be a jerk and rule an empire, but why? It’s just so much harder than leading through fundamental human values.
I may never get why someone would choose to make their own job harder than it has to be, but I’m convinced this myth – that profits must come at the expense of people, rather than with their willing help – is at the heart of it. I’ve spoken to all sorts of leaders for decades now. An awful lot of them really don’t see that they can have it all: a clear conscience, workers who are engaged rather than manipulated, customers who are fierce advocates instead of being trapped by onerous contracts; all of that.
It isn’t either people or profits, folks. Not even close. It’s people and profits.
Sharing that insight is why I get up in the morning. It’s why I love my own O.P.E.N. community so much. It’s why I wrote this post.
What other companies can you name that prove Good Karma is Good Business? Or in what ways am I completely deluded? Either way, please, let’s spark a conversation in the comments below.
Originally appeared on Ted’s previous blog.
Image credit: Library of Congress