Taking care of issues of social justice, climate control, poverty, and improving communities can no longer be in the purview of government-only organizations. For profit corporations must deliberately incorporate these issues into daily decision making.
The fact is that the government will not be capable of supporting the people on its own and corporations will not survive if profit is the only motive. A new age is here.
As both a federal employee and a small business owner, I am thankful to the Boston College Center For Corporate Citizenship for preparing this video and articulating this idea so well.
Great video…I’m totally with you – we truly need hybrid models between non-profit, for-profit, and government. I’m a firm believer in social entrepreneurship where the key focus is on improving the social good regardless of the model.
We will be launching a site that brings together Corporations, Governments, and Organizations with a focus on Society shortly.
Steve, Government employees and corporate business owners have been perceived as sitting on opposite sides of a theoretical fence. Some people make that line about security vs freedom. Some about giving vs greed. For me, the last 5 years of my 19 working for the DoD actually contributed to my going into business.
I was hired as the Chief for Defense Business Transformation for the Military Health System – a job that put me in direct and continual contact with the way the government does business, the economic and political pressures bearing down on it, and comparative commercial business models. I have two perceptions: 1. the government is in for some not so happy times (see David Walker, former Comptroller of the US and head of the GAO talk about his fiscal wake-up tour below) and 2. Businesses and citizens are going to have to start taking up some of the slack.
More than just talk about businesses adopting a civic minded approach, I decided to go do it. For four years, I discovered how little financial education most Americans have. I studied, took on mentors, filled my head with fundamentals, hired lawyers and accountants, filed my corporate structure, opened my corporate bank account, and took on clients. I applied a civil service mindset to figure out how I could make a model work that both increases wealth and improves communities.
It is possible. I still have yet to prove it is possible in financial terms, but I believe that it is – which is the first step in making it happen. If I can continue to make this profitable while giving something of real value back to communities, I believe I will have discovered the formula that more and more businesses will be adopting as this new economy really becomes reality.
Edwin, I’m interested in learning more about what you’re doing.
David
A very noble endeavour I must say. I took a slightly different path to the one you are suggesting, but it may be worth sharing some thoughts with you.
I decided as a mature businessman to return to the “grass roots”. I took a job with a Local Government body in NSW, Australia to work with and provide direct input into a local community.
It is interesting in that Local Government (in Australia) is where “the rubber hits the road” with Community aspirations. LG is also one example of your model. They are semi commercial (albeit with a captive client base), try to make a small profit annually but certainly need to be fiscally responsible. Their whole “raison d’etre” is to provide services to their local communities (across a broad range of endeavours). 100% of their revenue goes to meeting this goal.
Now this is probably not feasible for a “commercial” business but I am sure some very good mileage can be gained from marketing the fact that a business spends “x%” of revenue of “Social Issues”. It reminds me of the hype (in early days) around the amount of money businesses spent on R&D. Certainly technology based businesses published their R&D expenditure figures proudly. This is a marketing ploy to encourage new/old customers. Why couldn’t the marketing of “social” expenditure be used to attract more (new) customers.
I am happy to discuss further.
Darron, I like the idea of reserving and marketing x% towards social issues. This is something that every business can do – regardless of product or service the business provides.
At this point, I’m embedding our “give back” in the numbers, adding activities, changing decision making habits, & paying a little higher price for the acquisition if necessary. I do this for a couple of reasons: First, I don’t have the revenues or expendable cash flow to carve anything like that out yet. Everything we make goes back into the business to repay investors, cover operating costs & fund our next acquisition. Second, I’m deliberately trying to keep corporate responsibility from becoming a “side show” event. I’m concerned that as soon as I call it out separately on the ledger, I will be tempted (or my investors will be tempted to put pressure on me) to cut the budget at that line when things inevitably get tight. I’m trying to make our contribution more of a fundamental part of doing business, not merely a financial one.
I don’t have all the bugs worked out yet, but I know what I want it to look like: A profitable, investor friendly business that adds value above and beyond a line item on the budget to the community. For example, if I’m renovating an apartment building, I have a choice in the selection of building materials and accessories. I will chose to install handicapped accessible hand rails in the shower or chose 36″doors over 32″ doors.
Incorporating these kinds of value added decisions into our daily routine does cost more. But by considering them prior to acquisition, I can build them into the purchase price if necessary and still pay my partners and investors the same rates of return we would otherwise pay.
I realize this might sound a little complex, but for me, it really comes down the the decisions we make every day.
All that said, I think it’s great that you made a personal decision to give back through participating in local government. I know a few of my colleagues who have literally made fortunes in business and have decided to essentially “volunteer” their time with the government for the sole purpose of giving back. I have great respect for people who do this.
Many thanks to you and to others like you who are now part of the government to give back!
I have not listened to the Audio yet, but as soon as I read your thoughts, you sparked some thoughts of my own. It helped me in many cases when evaluating entities or groups of items to analyze how each individual part operated with respect to the group. I found some interesting things out when it comes to government:
Did you know that the charters states use to govern are conveniently called “incorporation articles”? It hit me when I looked at my degree, which was issued in Maryland with the words “corporation”. Then I thought a little deeper. If we look at the United States of America, the sum of it’s parts are the states themselves. Then States are made up of counties, counties of municipalities, municipalities of townships and each individual township are comprised of landholders. The landholders, owners of title, were usually men (whose names are passed down from generation to generation to track inheritances). Essentially, the landholders are like stockholders. The more property that is owned gives that individual a greater say, just like owning many shares of stock gives one a greater say in a company.
Companies collect revenues. Governments collect taxes. Government body would like to optimize tax revenues with respect to expenditures. Companies like to maximize revenues with respect to expenses. One man’s expense is another man’s revenue. They should all equal zero. Things that are not measured that accurately are intagibles, like ideas. Their value are often determined by calculating the net present value of their impact on society. One thing that is often overlooked are endowments of fixed resources. One cannot siphon ad infinitum.
Since it holds that a government are the sum of the landholders/taxpayers, then the ones who hold the most votes hold the most land. Usually wealthy people have this privledge, and they usually get their earnings and purchase their assets with cash or assets from their corporations. Since it is usually every man’s goal to pursue his self interest, the person with a large asset base is going to get together with other like minded individuals and promote and elect someone who maximizes their well being. Those are your delegates. They make the laws. The only thing that can stop them from growing in this spiral are fixed resources, like land, oil, lumber the list goes on.
So here we are in a new “conscious” era. The consciousness comes from, I believe, the realization that natural resources are fixed. Unfortunately for the environment, maximizing long term requires a large up-front initial investment. Since business models favor cash now rather than cash later, their long-term business plans are usually built as the sum of their short term business plans, allowing for an initial loss, expectation of high profit levels, usually leveling off as competition enters the market. I am not sure if they have built into their models consideration of fixed endowments (maybe exxon does), or other social welfare items, like increased population, congestion…the government is supposed to “police” those activities. But the police are hired by the mayor, who is elected by …and on an on
Essentially, government and corporations cannot be separated. They must be held accountable for their actions and inefficiencies. One last thing. There are some major problems in service related government. I had a terrible experience with the post office in my area, but nothing is getting done. Know why? Because the people I am complaining to have no reprocussions to change their behavior. They give me lousy service, and I call the higher up and get the same lousy service. I even called the Postmaster General’s Office for consumer affairs. I got transferred around then hung up on. It’s almost like I have to write a congressman or something.
Take care,
BC