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Balancing the bottom line and the public good

By John Hamilton

[August 25, 2010]

An inflammatory headline in the Wall Street Journal this week, “The case against Corporate Social Responsibility,” unfortunately colored an interesting article on balancing public and private interests when making business decisions.

It’s easy to dismiss those who suggest that businesses must always act either in the public good or in their private self interest, as if the two never overlapped. As a nonprofit, Vested for Growth invests in companies for a public purpose (to create quality jobs) but at each step of the due diligence and partnership, we recognize that their business viability is our first responsibility. Simply put: Companies that don’t survive don’t create or sustain jobs.

The article’s author, Aneel Karnani of the University of Michigan’s Stephen M. Ross School of Business, states that “in most cases, doing what’s best for society means sacrificing profits.” From the perspective of the small, privately held companies that we work with and that make up the backbone of N.H.’s economy, I would respectfully disagree.

When you are freed from maximizing quarterly returns for public investors, you have more choices and time with which to find creative ways to advance the public good while also reinforcing the bottom line. As Bo Burlingham points out in his book, Small Giants, when you are the only shareholder, you get to define what shareholder value is.

Burlingham interviewed numerous owners of small businesses, and identified the characteristics of some whose passions for their businesses went beyond “bigger is better” and ultimately drove them to be wildly successful:

  1. The CEOs recognized the full range of choices about the type of company they could create. They do not simply accept the standard options. They allow themselves to question the usual definitions of success and imagine all the possibilities.
  2. They overcome the pressures to take paths that they have not chosen, and that they do not necessarily want to follow. The people in charge remain in control by doing a lot of soul searching, rejecting well-intentioned advice, charting their own course, and building the kind of business that they wanted to live in, rather than accommodating themselves to a business shaped by outside forces.
  3. Each company has an extraordinarily intimate relationship with the local city, town, or country in which it does business—a relationship that goes well beyond the concept of “giving back.” The community helps mold the characteristics of the business, just as the companies play an important role in the life of the community.
  4. They cultivate exceptionally intimate relationships with customers and suppliers, based on personal, one-on-one interaction and mutual commitment to delivering on promises. The leaders were highly accessible and absolutely committed to retaining the human dimension of the relationships.
  5. They have unusually intimate workplaces that function like little societies, striving to address their employees needs—creative, emotional, spiritual, and social, as well as economic. Southwest Airlines’ Herb Kelleher refers to this as “caring for people in the totality of their lives.” These companies represent the ultimate expression of a business as a social institution.

So how do you balance the bottom line and the broader public good? I believe that those privately held companies that answer that question deeply will likely outperform their peers … and that their owners will get closer to realizing their own definition of success.

John Hamilton is Vested for Growth's Managing Director and the New Hampshire Community Loan Fund's Vice President of Economic Opportunity. More Community Loan Fund blogs.



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