Greed is (not) good. Here's a better capitalism.
Profit should not be the sole goal of business. Profit should be the byproduct of business excellence.
In the years since we first heard film character Gordon Gekko tell us “Greed … is good,” we’ve experienced a lot that reminds us just how wrongheaded that assertion is. The most convincing evidence, of course, is the recent near total collapse of the world economy and our continuing painful slog out of the residue of the Great Recession. And if you think that the greed-is-good mindset is not what informed those who led us off the economic cliff, then, to put it in clinical terms, you’re in denial.
Of course, Oliver Stone’s film "Wall Street," where we first meet Gekko, was not intended as a platform for laissez-faire economics, but a less-than subtle critique of it. Yet the would-be financial masters of the universe were not dissuaded. Indeed, they were emboldened by the words of the cheeky antihero. “Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit,” Gekko declares. And suddenly they were off and running as never before. Looking for pop-cultural reinforcement for Milton Friedman’s economic mantra – shareholder value is the only value – they surely had found it.
And boy did they ever run up the profits. Until, that is, reality came crashing down on all of us in the autumn of ‘08. And as we struggled to get to our knees, our business and political leaders assured us that we (and they) would learn from our (and their) mistakes and things would be forever different going forward.
But four years later, things don’t seem so dramatically different. Witness the two most recent de facto case studies: Chase loses well over $2 billion of investors’ money in an instant, yet CEO Jamie Dimon waltzes through his ensuing “confrontation” before Congress virtually unscathed; and more recently, just before London is to host the Olympics, Barclays’ Libor scandal hits (Barclays’ portion of which, Warren Buffet declares, will be but the tip of the global iceberg).
And our economic malaise continues. The Dimons and Blankfeins (as in Lloyd of Goldman Sachs fame) of the world are still in charge (not an adult in sight) and, frankly speaking, you and I are still in trouble, perhaps now more than ever.
We’re still in trouble because the underlying and still-unaddressed problem seems so daunting at first blush that we would prefer to ignore it altogether. But it’s not as ferocious as it might at first seem. The problem is that we remain unwilling to question the reigning dogma of Western capitalism. Dogma, remember, is a belief that is accepted without evidence, often perceived as self-evident, and is not to be disputed by adherents of the faith. The economic dogma of our time is a belief that business is and must be exclusively based on the supremacy of profit, a belief that a relentless focus on profit above all else is the one and only way of creating sustainable business success. It’s a narrow and crippling bit of economic doctrine that seems now to pervade nearly all quarters of the business world.
But in the words of Stephen Green, former HSBC chairman (and currently Conservative minister for trade and investment in the British government), this “will no longer do.” Of course we need a profit, he says but “profit is not the be-all and end-all of business. It is not the raison d’être of business.”
But if we are to smash this false idol, what then is to take its place?
Perhaps the most compelling possibility is found in an approach to business leadership called “transforming integrative leadership” or “transformative leadership” (TL) for short. The TL approach picks up where Lord Green leaves off. It defies the dogma of the day by requiring a dual-perspective approach to understanding profit.
The first perspective is the “Of course” perspective: Of course we need to turn a profit, much as we need food, air, and water to stay alive – we must generate a profit to reward employees (and shareholders) and surely to keep the lights on and the wheels turning. This is the no-brainer piece of the equation. But focusing on that as the endgame of business is like believing we live in order to breathe air rather than the other way around. It is myopic, just plain stupid. We may have gotten away with such myopia in a different time but not anymore.
The second and most important perspective is the “byproduct” perspective: Profit is a natural byproduct of business well-done and done for the right reasons. As Green says, “It is the byproduct and hallmark of success.” In the TL approach, business well-done is 1) the achievement of thoroughgoing organizational excellence, which is the result of 2) the systematic, rigorous development, professionally and personally, of the organization’s people, leaders, and followers.
And here’s what is curious to some (though quite reasonable to others). When this method is wisely and thoroughly implemented, profits soar. In fact, when all other things are equal, this approach has the peculiar tendency to run circles around its more traditional (transactional) competition. Employee and customer satisfaction improves and so does profitability. Just ask Southwest Airlines in the US, which practices a version of the transforming approach and recently completed its 39th straight year of profitability! (At some point you’d think that United, American, US Airways, and Delta would start asking why this might be so.) Or ask retail powerhouse John Lewis in the UK – whose commitment to customer service and the well-being of its employees is legendary. These are just two examples of an excellence-driven, people-centric approach.
But lest you suppose that the transformative approach is a thorn-less bed of roses, I should also point out that this leadership model is far more demanding and rigorous than old-world profit-is-everything models. It is arguably the single most demanding approach to leading ever instituted. It expects that the leaders not only systematically invest in the growth of their people – body and soul, as it were – but it also requires that they (with the support of their colleagues and their bosses) actively grow themselves in meaningful ways.
Far from being some softheaded, "Kumbaya," handholding approach lifted from a bad '60s joke, it’s a sometimes-in-your-face method that places a premium on unvarnished truth-telling, deep commitment, and tough-minded caring. Because of these core demands, to be sure, it is not for everyone, surely not for the faint of heart.
But for those who have a greatness of spirit that awaits expression, and for those who hunger to achieve the extraordinary – or in the words of Steve Jobs, those who long to put their own “dent in the universe” – it’s an approach to leadership whose time has come. And not a minute too soon. The time for proclaiming yesterday’s dogma is over.
– Cleve W. Stevens, a social ethicist and leadership development consultant, is president of Owl Sight Intentions in Los Angeles and author of a new book, "The Best in Us: People, Profit, and the Remaking of Modern Leadership."