Tuesday, April 17, 2007

"We should measure corporations by their impact on all their constituencies."

As someone who has long maintained that an enterprise is sustainable so long as all its stakeholders are satisfied, I was delighted to read this from the Nation, "The Establishment Re-Thinks Globalization," which comments on Ralph Gomory's book, "Global Trade and Conflicting National Interests.

"Gomory's vision of reformation actually goes beyond the trading system and America's economic deterioration. He wants to re-create an understanding of the corporation's obligations to society, the social perspective that flourished for a time in the last century but is now nearly extinct. The old idea was that the corporation is a trust, not only for shareholders but for the benefit of the country, the employees and the people who use the product. "That attitude was the attitude I grew up on in IBM," Gomory explains. "That's the way we thought--good for the country, good for the people, good for the shareholders--and I hope we will get back to it.... We should measure corporations by their impact on all their constituencies."

I found two item of good news in this piece. One is a challenge to the wisdom of "free trade" as an inevitable good and the other is the recognition of the necessity to include all constituencies or, as I described them, all stakeholders.

The specific problem Gormory is addressing and for which he is proposing solutions, is America's loss of economic strength and the general impoverishment that occurs when corporations acting globally fail to support the needs of their local stakeholders. In the context of leadership, these leaders who (un)consciously ignore a constituency have a narrowed vision and (un)consciously externalize costs to the neglected constituency. As can be seen in the first figure, any stakeholder that is excluded has no part in improvising, structuring and realizing solutions.

The general phenomenon is the same whether the externalized costs appear as auto industry unemployment and subsequent family and community dislocation, Enron employees' lost pensions or the pain of the Iraqi population. The institutions and their leaders lose these stakeholders' respect, their interest in conforming and willingness to respond. The second figure underscores how these potentially enthusiastic followers are excluded from the organization, are thus unable to contribute or collaborate with other stakeholders in finding solutions.

There appears to be a growing population who consider factors beyond stock price in their assessment of corporations as potential employers, good citizens and investment vehicles. This re-examination of Ralph Gomory's work is very timely.

Tuesday, April 10, 2007

Chief Responsibility Officer - CXO of the Month?

Almost exactly a year ago, in my post ChiefInnovation Officer I identified how CXOs are being named according to a variety of core corporate values like quality, information, learning and, at that time, innovation. Today the latest flavor is CRO or Chief Responsibility Officer which is so real that there is a magazine, "CRO" which is hosting its second (already) annual meeting of CROs in April.

A couple of things come to mind. Although I have not plotted the introduction rate of CXO functions over time I have the impression it is accelerating and wonder what that might mean. The other is that if there is a trend, what does it suggests about the next CXO function?

What is the job of the CRO? I'm not going to try to exhaustively define this but rather observe that its origins appear in the ideas around corporate social responsibility, i.e. that corporations should be good citizens and care for the environment, underprivileged and so on. As in the emergence of the earlier CXO functions it certainly appears the right thing to do, to ensure a corporation fulfills all its responsibilities beyond making money for its investors. But what are these responsibilities?

It is necessary that a corporation accepts the responsibility to satisfy all its stakeholders: investors, employees, customers, providers, partners, governments, local communities, and now including the environment, global communities. If any one of these stakeholders is unsatisfied the business is unsustainable, which becomes obvious earlier with dissatisfied investors and later with a dissatisfied global community, although those cycle-times may be-a-changin'.

There is a downside, however. It takes an individual to respond. Responsibility can only be taken, i.e. the commitment to respond can only be made, by an individual and it is a pretense to believe one person can take responsibility for the actions of another. The buck stops in the corner office because the occupant is expected to ensure that people in his/her organization do take responsibility and if they do not s/he has failed in managing and/or leading.

So, if someone else is in charge of others behaving responsibly with respect to a corporation's stakeholders, what does the CEO do? Meanwhile, does the CRO position open the door for thinking, "although I don't like what I see, I need not worry about it because that's the CRO's responsibility?"

A Leader-Follower can always be helped by good examples and role models. However, as this edge of the tetrahedral model "A Vision of Leadership for Collaboration and Innovation" shows,responding is about doing something new,innovating, as an action following some sort of stimulus, in a collaboratively negotiated fashion so the resulting contribution is satisfactory to all concerned.

The opposite, complementary edge of the model is about structuring, i.e. leading for implementation by providing vision and organization! We could jump to the conclusion that is the CRO's role. Wrong! It is the individual's responsibility to self-manage by visualizing and organizing thoughts, values and actions to implement what responsibility means to to him/her.

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