Inspirational Capitalism©: Doing Good, Having Fun, Making Money
How can capitalism be inspirational? In these articles on Inspirational Capitalism©, I examine the big picture (and little pictures) surrounding this question.
I’ll be writing more about all the ways that capitalism can be inspiring. Business is about making money, sure. But it’s also about how people work together, how they learn to make better lives, and how they realize their dreams.
Do you have your own story of Inspirational Capitalism? Feel free to get in touch with me to share.
Democracy? Not likely. A voice? Yes
By Bill Fotsch
There’s an interesting company in Madison, Wisconsin, not far from where I grew up. It’s called Isthmus Engineering and Manufacturing, and it builds complex high-tech factory-automation equipment. It’s also a co-operative, wholly owned and managed by its 32 member-employees. Every member sits on the board, which meets a couple of times a month. Board committees handle matters like finance and customer relations. A salaried general manager runs things day-to-day, but he’s directly accountable to the board. And he’s not allowed to become a member, for fear that too much power would be concentrated in one person’s hands.
Now, there’s a corporate democracy, and it seems to work just fine. (You can read more about Isthmus in my colleague John Case’s online publication Retooling Capitalism.) But Isthmus is an outlier in the world of capitalism. Most companies aren’t democracies of any sort and never will be. Shareholders typically want the board and the CEO to run things.
So does that mean a company has to be a rigid, autocratic hierarchy, where no one dares to make a move without the boss’s approval? I hope not. For most people, that kind of environment is about as inspiring as a jailhouse.
Let’s look at some ways employees can have a voice in the company they work for, even if it isn’t a democracy.
Individual decisions. If an employee is smart and experienced enough to do a good job on his own, let him. Nobody likes to be told what to do all the time; nobody likes to feel micromanaged. If employees don’t yet have the skills or experience to make good decisions by themselves, be sure they get the coaching they need to help them develop those skills.
Team decisions. Self-managing teams are popular these days. Project teams at software makers Valve and Menlo Innovations, for instance, operate with little or no supervision. W.L. Gore & Associates has operated successfully on this basis for many years. Of course, teams need good metrics so they can hold each other accountable for their performance. In my view you can’t really have effective self-management unless you also make the economics of the business transparent and easy to follow. But a team with clear objectives, metrics tied to the economics, and experienced members can usually make its own decisions.
Companywide decisions. Many bosses—CEOs, senior executives, company owners—feel that they have to make all the important decisions affecting their company. But a handful of companies delegate some big decisions to the employees who are most affected. Atlas Container Corp., near Baltimore, asked its shop workers to vote on which million-dollar corrugating machine to buy. Whole Foods Markets and others allow employees to vote on which benefit plan to choose.
Of course, you don’t need to go as far as voting if you are actually listening to the views of people who are affected by a decision, or who have relevant expertise. It’s called participative management, and really it’s only common sense. Given clear common goals, ideas that best advance those goals are acted upon, regardless of where they come from. An individual manager sees things from only one perspective. If she gathers a lot of input before making her decision, chances are good that the decision will be better than it otherwise would be.
What does all this have to do with inspiration? A lot. Employees who feel that they have a say in the business begin to think of the company as their own. They start learning about how things work. The more they learn, the more they think and act like businesspeople rather than like hired hands. It’s hard to feel inspired when someone is telling you what to do all the time. But it’s easy when you feel that your views count, and that people are listening to what you have to say.
The Really Transparent Workplace
By Bill Fotsch
The previous article in this series focused on trust. This one is on transparency. The two reinforce one another. Transparency builds trust, and a trusting workplace is likely to be a transparent one. Both are inspirational.
But what does transparency in the workplace mean in practical terms?
Spend a few moments googling the subject and you’ll find a host of different answers. Transparency means sharing individual salaries, as they do at Whole Foods. It means being “authentic” and “real.” It means “making sure [that] employees conduct their work in plain view—visible in open offices, monitored with sensing technology and tracked through digital activity” so that companies can “increase accountability, collaboration, knowledge sharing and innovation.” (This last is from an article by Harvard Business School professor Ethan Bernstein in the Wall Street Journal.)
Let’s look at these definitions a little more closely. Everyone visible and accountable? Sure, that’s good, up to a point—as Professor Bernstein acknowledges. On the far side of that point, this kind of transparency feels intrusive and Big Brother-ish, particularly if employees don’t trust management to look out for their best interests.
As for being authentic and real, these are fine goals. They’re just a little hard to pin down, or to translate into operational terms. If managers aren’t the kind of people who are naturally authentic, how would you teach them to be so?
And sharing salaries? For some reason, that’s a hot item these days. “Secrecy About Salaries May Be on the Wane,” says the New York Times. “Disclosure of pay information in organizations is no longer much of an issue,” declares Harvard Business School’s Jim Heskett. The message from his readers, Heskett adds, is “‘Find a way to do it,’ with some cautions and advice about how to make such information available to all.”
My own view is that none of those definitions of transparency makes much sense—or much difference—unless the fundamental economics of the business are also transparent. And unless employees feel that this business is their business.
If employees see key financial numbers every week, they’ll soon learn to understand what those numbers mean. They’ll ask questions about why the numbers are increasing or decreasing, and they’ll figure out ways to make them move in the right direction. The employees will come to feel less like hired hands than like partners in the business. They will be able to make better decisions because they understand the business economics, and they will know if their jobs are secure because they can see whether the business is profitable or not. If they’re paid a share of the profits when the company hits its targets, they’ll feel even more like partners.
Partners don’t mind being visible and accountable to their coworkers—in fact, they expect it. They also have a good reason to expect everyone in the company to be straightforward and honest in their communications. If someone isn’t telling the truth, the numbers will soon reveal the deception.
Even the issue of sharing salaries takes on a different hue. If employees don’t understand the business, they’ll have no context for understanding salary differentials, and they’re likely to be outraged by perceived unfairness. If they do understand the business—the importance of a highly productive sales rep, say, or a key IT person—they’ll know why the company is paying what it does. (Of course, if salary differentials reveal favoritism or arbitrary judgments, then management will have some explaining to do.)
Transparency in a business is a great thing, because it really does build trust—and when people feel trusted, they’re likely to feel inspired. But let’s make transparent the things that really matter.
The Power of Trust
By Bill Fotsch
Trust can be a hard concept to pin down. It isn’t tangible. It isn’t an emotion, like love or sadness. You really have to define it in operational terms. When you trust people, you’re confident that they are being open and honest, that they’ll do what they say they’ll do, and that they’ll look out for your best interests as much as they can.
However hard the word may be to define, it’s easy to spot the absence of trust. Take the workplace—or at least many workplaces. Employees at a lot of companies have little confidence that management is being open and honest, that it will do what it says, and that it will look out for the employees’ best interests.
Zero-trust workplaces like these are toxic. Managers feel they have to watch employees closely to keep them from slacking off, cutting corners, or stealing company property. Employees put their heads down, try to get their jobs done as best they can, and punch out as soon as possible. If they have ideas about how to do something better or more efficiently, they’re likely to keep those ideas to themselves. The company’s performance suffers accordingly.
But what if you could create a workplace where people really trusted one another? Now, that might be pretty inspiring.
For one thing, you could do away with that close supervision and all the costs it entails. You’d know that people would generally do the right thing, whether or not someone was watching.
For another, you’d know that people who came up with great ideas would share them. They’d trust the company to use the ideas to further everybody’s best interests.
Harvard Business School professor Ethan Bernstein reports on a videogame developer called Valve Software, whose 400+ employees work entirely on their own, without bosses. People form teams called cabals to develop new projects; the only requirement is that what they develop must be valuable to Valve’s customers. No one, says Bernstein, “has the role of keeping tabs on the cabals or shuttling information back and forth.” Sounds like a pretty trusting environment to me.
Developing a high-trust workplace isn’t hard in theory, but many people will have to lose some long-ingrained habits.
One principle is that you can’t keep secrets. If someone asks about plans or strategies or financial results, you tell them. Open-book companies make a point of sharing key financial numbers with everybody, and of course helping nonfinancial employees to understand what the numbers mean.This transparency not only enables the employees to make better decisions, it also reinforces trust. The inevitable improvement in performance is a huge competitive advantage. (The only “secrets” most open-book companies keep have to do with personal privacy, like how much Charlie makes or why Theresa had to miss work for a week.)
A second principle: you don’t say one thing and do another. If you say your company is committed to sustainability, for instance, you don’t dump chemicals in the river out back. The big consumer-products company S.C. Johnson set a public goal in 2001 of increasing every year the percentage of ingredients that have a lower impact on the environment and human health. In 2004 it removed a potentially hazardous chemical from Saran Wrap even though it knew the change would eliminate the product’s competitive advantage. The move hurt the company’s bottom line, but to do otherwise would have meant sacrificing everybody’s trust. (You can read the CEO’s account of the decision here.)
Doing what you say you are going to do has a precise operational meaning in open-book companies. They typically forecast their key economic metrics on a weekly or monthly basis and put the forecasts up for all to see. Then, when the actual results are in, they learn from the variances and continue to improve both the forecasting and the performance.
Finally, you really do have to look out for the best interests of the people who depend on you for their jobs and livelihoods. That might mean paying above-market wages or starting a profit-sharing plan. It might mean providing better health-care benefits than the law requires. In return, you would expect employees to look out for the best interests of the company and its customers. Many forward-looking companies abide by the mantra, Take care of the employees and the business will take care of itself.
Companies that are built on trust aren’t the only ingredient of inspirational capitalism©. I’ll discuss others in future articles. But one sure bet is that nobody will be inspired by an economic system in which trust is absent. And where trust is abundant, strong results usually follow.
Finding Meaning and Purpose—at Work
By Bill Fotsch
It has always amazed me what people do in their time away from work. They build a wooden boat or recondition a vintage Corvette. They take an oil painting class or create a website. They volunteer for their church, a charity, or a political group. And of course they put enormous amounts of time into raising their kids.
It’s all a way of infusing meaning and purpose into life. That’s what we human beings do: we create projects for ourselves, things we think will be important or at least deeply satisfying. We work hard on them, just for the satisfaction of accomplishing something.
And then we have our jobs. For a lot of people, work is about as far from meaning and purpose as you can get. Check your brains at the door and do what you are told. If you asked many people their purpose at work, they’d reply “to put food on the table” or words to that effect. Some 70% of U.S. employees report that they are not engaged with their jobs or with the company they work for. Most would probably quit tomorrow if they could afford to.
It’s hard to blame employees for this situation, because the mission and purpose of many companies seems to be to generate more money for shareholders and top management. Period. Tell me—who’s going to get excited about making more money for somebody else to pocket? For the average employee of the average company, capitalism isn’t too inspiring.
But then there are the companies that have a mission well beyond making money and that engage their employees in supporting the mission. Google isn’t just about selling search-related ads; it wants to “organize the world’s information and make it universally accessible and useful.” Southwest Airlines isn’t in business just to collect travelers’ airfares and pay dividends to shareholders; it wants to be “the world’s most loved, most flown, and most profitable airline.” It adds, “We exist to connect people to what’s important in their lives through friendly, reliable, and low-cost air travel.” I love their motto, “providing the freedom to fly.”
Companies like these take their missions seriously, making those missions a point of differentiation and competitive advantage. They remind employees frequently that this is why they come to work every day. Southwest, for instance, regularly circulates stories about employees who go the extra mile to help people connect and make the airline the “most loved.” Here’s what Forbes contributor and author Carmine Gallo says about it:
Every week [CEO] Gary Kelly gives a “shout out”—public praise—to employees who have gone above and beyond to show great customer service. Each month the Southwest Spirit magazine features the story of an employee who has gone above and beyond. Southwest highlights positive behaviors through a variety of recognition programs and awards. Finally, internal corporate videos like this one are filled with real examples and stories to help employees visualize what each step of the purpose looks and feels like.
It shouldn’t be hard for any business to come up with a mission that offers its employees a sense of meaning and purpose. After all, every successful company is producing goods or providing services that people find useful and are willing to pay for. That by itself is an important mission. What’s more, every company can strive to offer the highest quality, to provide the best service, to deliver the greatest value—to be a leader in its industry, like Southwest and Google. Everyone likes to feel that they are a part of something bigger than themselves. They also like to feel like winners—like they’re actually achieving something and coming out on top.
I’ve seen this kind of feeling not only in iconic companies like Southwest but also in everyday, seemingly ordinary companies—Anthony Wilder Design/Build in Maryland, Boardman Inc. in Oklahoma, Feuerborn Associates Engineering in Idaho. These organizations have opened their books, sharing the information that is the lifeblood of any company, tangibly showing trust in their employees. They have engaged employees in creating great businesses that provide terrific products and services to their customers. Not incidentally, they make a point of sharing the wealth that the employees help create. Believe me: The people who work for such companies are both inspired and more successful.
A paycheck is important, no doubt about it. But anyone who works for just a paycheck is never going to find capitalism inspirational. Companies that set a real mission for themselves—and engage their employees’ hearts and minds in realizing the mission—transform the meaning and the purpose of work, providing great inspirational capitalism success stories.
How Can Capitalism Be Inspirational?
By Bill Fotsch
It’s a big claim, the label I’ve chosen for this series of articles. We usually think of inspiration as coming from faith, from heroism, from great artistic achievements—not from something as ordinary as making money. Business is business, you might think. Necessary? Sure. Inspirational? Get real.
So let’s step back a bit. To understand the inspiring elements of capitalism, you have to look at the big picture. And the little picture(s). And a whole bunch of stuff in between, which will help you understand why so many people are not inspired by capitalism, and what you can do about it.
Big picture first. The capitalist system has created the highest standards of living in history. Thanks to capitalist enterprise we have plentiful food, clothing, and shelter. We have cars, computers, and high-tech health care. As people all over the world have learned, no other system has ever been able to deliver this level of economic development.
And you want to talk about fighting poverty? Capitalism fights poverty. The well-respected magazine The Economist noted not long ago that China’s rapidly growing economy pulled 680 million people out of misery between 1981 and 2010. That reduced China’s extreme-poverty rate from 84% in 1980 (under communism) to 10% today (under a mixed but mostly capitalist system). “Take a bow, capitalism,” said the magazine.
Then there’s the little picture, or, little pictures, of all the individuals who have taken advantage of the amazing opportunities capitalism can provide. Pat Kelly spent most of his childhood in a Virginia orphanage, then went on to found and lead PSS/World Medical, a billion-dollar healthcare company recently acquired by McKesson Corporation. Brandi Tysinger-Temple is a North Carolina mom who sewed clothes for her children—and then learned to sell her clothes to other moms on Facebook. Today Brandi is CEO of Lolly Woddle Doodle, a children’s clothing company that provides good jobs for more than 100 people in her hometown of Lexington.
Aren’t these stories inspirational?
So why does capitalism get a bad rap from so many people? Why do they find it distinctly uninspiring?
Most people would agree that private ownership of business is better than state ownership. But private ownership—capitalism—is messy. In the hurly-burly of competition, some individuals will stretch the truth or try to cut corners by doing things as cheaply as possible. They’ll take advantage of whomever they can, whenever they can. That’s why the U.S. and every other country in the world have laws and regulations governing the marketplace. Participants are required to play fair or face the music. It’s why Enron and WorldCom executives are in jail.
Liberals and conservatives argue vehemently, as they should, about how to regulate and how much to regulate. Disagreement about both questions is healthy. But nobody wants to go back to the days of rotten meat and toxic medicines. Markets work best when the ground rules are clear. Fortunately, in today’s world of social media and global communication, bad behavior gets penalized pretty quickly, often before governments can react.
But there’s a more important reason for capitalism’s lack of inspiration. Too many people don’t get to take part.
Think about your first job—in high school, say. Or think about the jobs that many of your fellow citizens hold, not to mention the jobs you might have to take if you were born in India or Indonesia. At best these jobs involve showing up for work and doing boring tasks for eight hours or more every workday. At worst such jobs can be stultifying, humiliating, or dangerous.
Moreover, some people find that their wages are barely enough to live on, let alone support a family. Even in the United States, a full-time employee at Walmart and many other companies may earn little more than $20,000 a year. If that’s a family’s only income, they’re eligible for food stamps. Inspired they aren’t.
But suppose you build a company in which everyone is a capitalist. Maybe you have a profit-sharing arrangement. Maybe you share ownership through an employee stock ownership plan (ESOP). Maybe you help people learn the financials and figure out how they can drive better results, with bonuses for everybody if they succeed.
There are plenty of mechanisms, and there are plenty of companies that do just this kind of thing, from Southwest Airlines to Colorado’s New Belgium Brewing Company. I recently read about an employee-owned grocery chain called WinCo, based in Boise, Idaho. More than 400 of the company’s employees—including clerks and cashiers—own more than a million dollars’ worth of stock. These people are inspired. This is capitalism done right.
I’ll be writing more about companies like these, and about all the other ways that capitalism can be inspiring. Business is about making money, sure. But it’s also about how people work together, how they learn to make better lives, and how they realize their dreams.
Done in the right way, capitalism can be every bit as inspiring as the Sistine Chapel.