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Profits with Principles - Seven Strategies for Delivering Value with Values by Ira A. Jackson and Jane Nelson

Submitted by: Doubleday

Categories: Community Development

Posted: Jul 13, 2004 – 12:00 AM EST

 

To read an excerpt from Profits with Principles, click here.

At a time when unethical business practices continue to dominate headlines, a manifesto for change offers persuasive proof that companies that combine profit making with a concern for values and the greater social good do better than those that concentrate only on the bottom line.

"A Stunning achievement . . . This utterly original work is not only a survival guide for business and business executives, but also a survival guide for capitalism itself."
-- Tom Peters

NEW YORK - At the end of the twentieth century, the triumph of global capitalism seemed virtually complete. Capitalism had torn down barriers, both virtual and real--the Iron Curtain and the Berlin Wall. It had mobilized virtually every nation around a common pursuit: economic progress and wealth creation, with over three billion people moving, in the space of less than a decade, from centrally planned economies to economies shaped to a great extent by the forces of the free market. In the U.S., the engine of capitalism created more than 22 million jobs in less than ten years; the financial wealth of Americans increased by an astonishing $3 trillion a year for the years 1998-2000; and the Dow Jones Industrial Average appeared to have overcome the laws of gravity, moving from 3,000 in April 1991 to 11,000 in May 1999, after having taken 15 years to shift from 2,000 to 3,000 between 1972 and 1987.

Between 2000 and 2003, however, a number of political and economic events turned the post-Cold War euphoria of global capitalism on its head. In the U.S., a corporate governance crisis--sparked by the spectacular implosion of companies such as Enron and World Com--undermined public trust in our economic system. The diverse system of checks and balances intended to make our system of capitalism effective were seen by an increasingly cynical public to have been overwhelmed by greed, arrogance, complacency, and hype. Other crucial factors, including the bursting of the dot-com bubble, slowing economic growth worldwide, the events of 9/11 and the increased threat of terrorism, growing scientific evidence of the dangers of global climate change and environmental decline, and rising antiglobalization sentiment combined to form a "perfect storm" that put big business--especially companies with global brands and global reach--on the defensive.

Meeting the daunting challenge of surviving in the face of today's relentless competitive pressures, increased political and economic uncertainty, changing societal expectations, and public demands for better governance, transparency, and accountability requires business to develop a new framework for delivering profits and long-term value for shareholders while rebuilding public trust and confidence and providing value for society. So argue Ira A. Jackson and Jane Nelson in their new book PROFITS WITH PRINCIPLES: Seven Strategies for Delivering Value with Values(Doubleday/Currency; June 27, 2004; Hardcover; $27.50), an unabashedly positive and hopeful manifesto for corporate change that, supported by growing empirical evidence, shows persuasively that tomorrow's most successful and competitive companies will be those that combine a commitment to profitability with an explicit commitment to advancing the public interest.

Drawing upon case studies of more than 60 companies around the world that are already delivering both private profits and public benefits, as well as on their own extensive experience in the corporate, academic, public, and nonprofit sectors, Jackson and Nelson identify seven principles that can serve as a framework for any company or businessperson who aspires to achieve long-term profitability while contributing to a better world:

Principle #1: Harness Innovation for Public Good. Innovation is the lifeblood of sustainable and profitable business and is vital for building national competitiveness and social progress. Great companies understand the immense opportunities and responsibilities of innovation. Harnessing innovation for the public good, they explicitly and systematically integrate ethical, social, and environmental considerations into their innovation and research-and-development efforts.

Principle #2: Put People at the Center. The quality of relationships that a company has with its employees and other key stakeholders--customers, investors, suppliers, public officials, activists, and host communities--is crucial to its success and its ability to anticipate or respond to changing competitive pressures and societal expectations. Leading companies ensure that they have a clear understanding of who their stakeholders are and what matters to them. They work to ensure there is regular communication and consultation with these people and aim to build relationships that are based on mutual benefit, learning, accountability, transparency, and trust.

Principle #3: Spread Economic Opportunity. Great companies create wealth and increase economic opportunity. They make systematic efforts to spread economic opportunity as widely as possible, not only to their owners but also in the workplace, along the supply chain, and in local communities. Efforts to spread economic opportunity include making a commitment to employee diversity, investing in local economic development, building business linkages with small and micro enterprises, and supporting programs to increase access to information technology, education, and training.

inciple #4: Engage in New Alliances. There is a growing need and potential for companies to build cross-boundary alliances, often with nontraditional allies beyond the business sector. Successful companies today build new types of partnership to increase the leverage and effectiveness of their philanthropic and community investment programs. They undertake joint efforts with other companies, as well as nongovernmental organizations and government bodies, to build more progressive public policy frameworks, more legitimate governance institutions, and more equitable market mechanisms.

Principle #5: Be Performance-Driven in Everything. A growing number of the world's most successful companies publicly commit to explicit targets for their ethical, social, and environmental performance, in addition to their financial and commercial performance. They establish management systems, incentive structures, training programs, and compliance processes to create the performance-driven culture that is necessary to strive toward the achievement of these goals.

Principle #6: Practice Superior Governance. Visionary companies recognize that practicing superior governance in today's world calls not only for more rigorous approaches to corporate governance, but also sustainability governance--namely, greater accountability, transparency, and independent oversight of all the company's key areas of performance, not only its financial performance. They also see the importance of supporting more transparent and noncorrupt interaction between business and governments--of practicing public governance.

Principle #7: Pursue Purpose Beyond Profits. Sustained, long-term business leadership is built upon clarity of purpose, principles, and values. The best leaders recognize that embedding principles and values in the company's day-to-day operations requires a systematic, rigorous, and ongoing effort that reaches beyond vision statements and fine words. They actively engage their employees, consult with external stakeholders, invest in training and accountability systems, act as models in the workplace and beyond, and emphasize the centrality of purpose and values even more in tough times than in prosperous ones--even if adhering to their principles and purpose results in a competitive disadvantage, missed opportunity, or higher costs.

To illustrate how these seven principles established in PROFITS WITH PRINCIPLES can be put into practice, Jackson and Nelson provide over sixty examples of companies around the world whose actions illustrate the benefits that principled companies can offer to society as well as the potential that sound principles can offer to business for delivering profitable and sustainable growth. Among the companies they look at are the following:

  • Large industrial companies such as DuPont, Toyota, Ford, Dow Chemical, and Alcoa, which have cut operating costs, improved quality, and gained market share through innovative redesign of products, services, and manufacturing systems. In many cases, these measures have improved safety and environmental performance.

  • Financial institutions such as FleetBoston, Citigroup, JPMorgan Chase, Deutsche Bank, and Goldman Sachs, which have started to reach out to underserved markets and "bank the unbankable." They are providing financial services and training to low-income communities in the U.S. and internationally by developing innovative new products and services and combining simple philanthropy with long-term business opportunities. In doing so they are starting to build new markets, loyal new customer bases, brand equity, and new sources of profit.

  • Consumer goods companies such as Unilever, Home Depot, Nestle, Proctor & Gamble, Coca-Cola, Starbucks, Nike, and McDonalds, which have recognized, in different ways and for different reasons, that their ability to meet changing consumer demands and protect brand equity will require them to improve their social and environmental performance. To accomplish this, they are engaging in a variety of alliances and consultation processes, often with traditional adversaries, in order to manage and measure their performance and tap into new markets and sources of innovation.

  • Information technology companies such as Cisco Systems, Nokia, Dell, Vodafone, Hewlett Packard, IBM, and Microsoft, which are developing new alliances and creating economically viable business models and social venture solutions for bridging the "digital divide."

  • Large global operators such as BP, Chevron Texaco, General Electric, and General Motors, which are playing a leading role in addressing calls for better corporate governance and are also engaging in collective efforts with governments and other companies to tackle tough problems such as global climate change and more equitable international development.

  • Pharmaceutical companies such as Merck, Johnson & Johnson, Novartis, and Pfizer, which--in the face of increased competition and challenges to their intellectual property rights--are endeavoring to develop new business models and alliances to improve access to essential medicines and invest in their local communities.

    "We are convinced that the companies playing a leadership role in addressing these challenges will reap sound business benefits in terms of long-term competitive advantage, better risk management, and new market opportunities," write Jackson and Nelson. "At the same time, in a world where the private sector is increasingly powerful and influential, taking on a greater leadership role is simply the responsible and right thing to do."

    Representing a valuable contribution to the growing debate about what corporate practices should look like in the twenty-first century and offering a powerful combination of practical examples and key lessons with broad application, PROFITS WITH PRINCIPLES is both a clarion call for corporate change and a tool kit that will help people in business to implement the new leadership disciplines and practices required to build competitiveness, profitability, and trust in today's turbulent world.
    # # #
    PROFITS WITH PRINCIPLES
    Seven Strategies for Delivering Value with Values
    By Ira A. Jackson and Jane Nelson
    Published by Currency Doubleday
    Publication Date: June 29. 2004
    Hardcover; 400 pages; $27.50
    ISBN #: 0-385-50163-3

    About the Authors
    IRA A. JACKSON is a fellow at the Center for Public Leadership at Harvard University. Previously, he was the director of the Center for Business and Government at Harvard's Kennedy School, where he was also associate dean. Earlier, he served as the Massachusetts commissioner of revenue, and for twelve years he was an executive vice president at BankBoston.

    JANE NELSON is a senior fellow and director of the Corporate Social Responsibility Initiative at Harvard's Kennedy School of Government and director of Business Leadership and Strategy at the Prince of Wales International Business Leaders Forum. She is a former vice president at Citibank.

  • For more information, please contact:

    David Drake Doubleday
    Phone: +1-212-782-9001

     

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