Introduction

If your actions inspire others to dream more, learn more, do more and become more, you are a leader. —John Quincy Adams, the sixth president of the United States

Traditional Utilitarian Economic Philosophy and Practice Has Had Its Day

Over the past thirty years, we have been witness to a string of economic crises occurring at ever-shorter intervals. Violent global shocks coursing through the economy are increasingly also shaking the foundations of the civil societies affected by the process, creating a growing divide between business and society. The continuously widening income and wealth inequality that we see in so many national economies is making this divide even larger.

At the same time, the number of employees who feel less and less connected with their work and their employers is steadily increasing—the gulf between companies and their employees is widening, and rigorous cost savings and the associated reduction of benefits are likewise opening a chasm between businesses and their customers.

The emergence of these crises and distortions is not primarily the result of inopportune economic constellations; the causes lie deeper, in traditional economic thinking and acting itself: the dogma of the standard and mainstream theory of economics, that maximizing one's own (short-term) benefit or profit leads to the greatest common good. This theory has proved to be untenable. To put it in its own terminology, it is inefficient.

Outlines of a New Enterprise Philosophy and Culture

This book does not merely criticize these issues but attempts to open the door to a new approach to economic thinking and acting on a theoretical and practical level. The central points of departure are corporate philosophy and culture: they constitute the link between employees and companies on the one hand and between companies, customers, and both society and the natural environment on the other.

As empirical research demonstrates ever more clearly, corporate culture is a highly relevant independent factor in the performance and robustness of a company, yet many education curricula still do not afford it nearly its rightful role. This is because there is a myriad of methods to identify corporate culture and correlate it directly with a company's success. However, many of these approaches are merely descriptive and are not very helpful. Statistical correlations between certain types of corporate cultures and the company's success do not say anything specific about the real reasons for this connection, and it is therefore difficult to develop and sustain a high-performance corporate culture based on these approaches. Best practice comparisons and external benchmarking in the field of corporate culture are of no real help, either.

Back to Fundamentals—Looking for a New Motivation Theory

That is why this book starts with the most fundamental approach: it establishes and develops the concept of a meaning- and performance-centered philosophy and culture, firstly out of the company's purpose to provide services and secondly out of humanity's basic needs—in other words, our existential needs. These will be examined in the context of philosophical anthropology, meaning-oriented psychology, and neuro-and evolutionary biology. The first existential need that we will consider is man's desire for meaning—that fundamental desire that we humans have for insight into the meaning of our actions and our functions. The second is our need for recognition as human beings; this is the source of our individual identity and the sense that we have a place in life, that our existence has meaning—meaning as opposed to futility.

These needs are this fundamental because they are the basic attributes that raise humans to the status of human beings—they constitute our humanity. Our will and our power to mobilize our resources are strongest when these needs are fed. If you require people to perform, you have to offer them opportunities to experience meaning and recognition in return.

From Motivation Theory to Enterprise Philosophy and Culture

The next question that needs to be answered is, how should a corporate philosophy and culture be designed in order to fulfill these existential needs, thus in turn providing the company with a strong potential for performance? The core idea is this: research shows that, according to key indicators, companies that consistently serve their clients and society above all else are, in the long run, six to nine times more profitable than companies that subordinate everything else to short-term self-interest or profit maximization. This has nothing to do with romantic notions of business—there are good reasons why this is so.

From Philosophy and Culture to High-Enterprise Performance and Lasting Success

The first and most important reason is that companies that primarily focus on serving customers and society—thereby fulfilling a purpose instead of merely pursuing an end in itself—become rich sources of meaning and appreciation for their employees. Their employees feel that they are doing some good to somebody or something through the work they perform for their company—in other words, that they are making a meaningful contribution. At the same time, they anticipate the appreciation that goes hand in hand with this. Their potential and willingness to perform are correspondingly high, and this spills over into the company's performance potential—"my goals, your goals, the company's goals are finally one and the same!"(Gertrud Höhler).

The second important reason is that these meaning- and performance-oriented businesses have the awareness of and the motivation and understanding for how they can synergistically combine their services for their customers with a benefit to society. This can result in direct economic benefits along their entire value chain, such as a reduction in transportation and production costs, access to high-quality raw materials, healthier employees, and so on—to name but a few references to sources that give them comparative competitive advantages over companies that place short-term profit maximization above everything else. This idea of a synergistic relationship between business and society relates to the approach of creating shared value developed by Porter/Kramer.

The third main reason why businesses that place themselves first and foremost at the service of their customers and society prosper is that these companies benefit from their excellent reputation in the community. This gives them access to resources that are almost entirely inaccessible for primarily self-serving companies. Their reputation brings them recognition—the best people want to work for them—and in combination with a strong brand, this creates a "positive prejudice" among their customers. The media is sympathetic toward them, and they are often able to build a high degree of trust with lenders, government, and politicians—this, in turn, is their key to economically important resources.

Coevolution—Key to a New Era of Economic Thinking and Business Practice

Coevolution is the maxim of the future, with sustainable promotion of life its guiding star: in the long run, it is not the companies that maximize short-term self-interest that will survive but rather those that believe in serving and empowering their partners in order to experience growth and prosperity together.

The Value Balance in Business as a Tool for Audits and Assessments

The first part of this book deals with developing a reference model for a meaning- and performance-centered enterprise philosophy and culture, as has just been outlined, based on contemporary motivation theory and empirical research. The second part represents a proven tool—the Value Balance in Business—that enables companies to systematically develop and sustain a meaning- and performance-centered corporate philosophy and culture that is tailored to their needs.

The key questions at the core of a Value Balance in Business corporate culture assessment or audit are as follows:

1. To what extent do employees see meaning in their work?

2. To what extent do they experience recognition as individuals in the company?

3. How pronounced is the resulting motivation on the part of the employees?

The Value Balance in Business uses a structured grid to systematically assess the extent to which employees experience meaning and recognition in the company. Its perspectives derive from a consideration of all the areas in the company where sources of meaning and recognition exist or could exist. These are listed below:

1. Leadership or senior management

2. Mission, vision, and values

3. The relationship between employees and customers

4. The employees themselves and their dispositions

5. The attitude employees have toward the company's products and services

6. The company's market position and capacity for innovation from the employees' point of view

7. The company's reputation in society, as gauged by the employees

8. The shareholders and their attitude toward the company, from the employees' perspective

9. Internal communications, their credibility and usefulness as assessed by the employees

10. Motivation as a dependent variable of the empirical model is defined by three items (formed to an index):

a. Degree of loyalty that employees have toward the company

b. Level of motivation toward the company

c. General personal performance in carrying out professional tasks

This is the basic format for all Value Balance in Business audits and assessments. Data is collected in each of these areas through online surveys or printed questionnaires. With its nine dimensions, the Value Balance in Business audit is clearly much more diverse (i.e., much more nuanced) than most tools of a similar kind. This is in particular due to the inclusion of Perspective 2 (mission, vision, and values), Perspective 3 (customers), Perspective 5 (products and services), Perspective 6 (market position and innovation), and Perspective 8 (shareholders). With this diversity of perspectives, the Value Balance in Business audit embraces a variety of possible sources of meaning and appreciation and provides several different measures for increasing employee motivation. This follows the old physicians' rule that the treatment can only be as good as the diagnosis.

The Role of Creating Shared Value (CSV)

How a company translates a meaningful and performance-centered corporate philosophy and culture into tangible, day-to-day commercial activity, however (i.e., how it designs a value-creation process in line with a meaningful and performance-centered corporate philosophy and culture), is a question that Michael E. Porter and Mark R. Kramer address in a way that is very promising for the future of business and the economy with their concept of "creating shared value" (CSV).

The Value Balance in Business embeds the concept of creating shared value in the philosophy and culture of the company, giving it deeper meaning and impact and ensuring that it is practiced permanently and consistently.

New Thinking for a New Era—From Maximizing Short-Term Gain to Coevolution

The idea that profit is a natural byproduct of doing something well, not an end in itself, is also most universal (among excellent companies). —Thomas J. Peters and Robert H. Waterman

2.1 Creating Shared Value (CSV) as per Porter/Kramer—A Promising Yet Underrated Concept in the Business World

The second Industrial Revolution in the mid-nineteenth century coincided with severe ethical uncertainty within English society. It resulted in the emergence of two utopias at the same time in the same place, both of which would have a lasting impact on world history. The socialist utopia of Karl Marx had well and truly foundered by the late twentieth century, and the utilitarian utopia of John Stuart Mill and Jeremy Bentham has also exceeded its use-by date—the signs of this are unmistakable. The following verdict is a very astute summary and all the more compelling because it does not come from a fundamental business critic but rather a very prominent business professor and advisor of many large companies around the world—Michael E. Porter (together with Mark R. Kramer). In their eyes, the system of capitalism is under siege because, in recent years, business has been viewed as an important source of economic, social, and environmental problems. Their explanation is that companies themselves adhere to an antiquated approach to value creation:

They continue to view value creation narrowly, optimizing short-term financial performance in a bubble while missing the most important customer needs and ignoring the broader influences that determine their longer-term success.

In Porter and Kramer's view, the solution lies in the business world's ability to bring business and society back together. The creation of shared value is the key to this process. It involves creating economic value in a way that also produces value for society by taking into account its needs and challenges. Porter and Kramer's credo and ceterum censeo:

Business must reconnect company success with social progress.

According to Porter/Kramer, companies can organize their business activities in such a way that they combine value creation for the company with similar benefits to society and achieve competitive advantage in the process. Porter/Kramer suggest they do this by:

1. Designing their products appropriately (e.g., through investment in the development of environmental technologies), and defining new markets (such as the introduction of microfinance in the United States)

2. Taking initiatives along the value chain:

– in energy consumption and logistics (e.g., by reducing transport distances through shrewd purchasing strategies, which will benefit the environment and reduce transport costs)

– in their use of resources (e.g., by conserving water)

– in procurement (e.g., by purchasing from local/regional producers and cutting out the middleman and associated speculative elements, thus giving suppliers and customers increased security while raising product quality)

– in distribution (such as insurance policies via mobile phone in the third world, which reduces the cost to both insured and insurer and eliminates unscrupulous insurance agents)

– in employee productivity (e.g., through antismoking campaigns that promote the health of employees, saving the company huge health-care costs and reducing absenteeism in the company)

– in location policy (production closer to the sales markets, which in turn reduces transport costs, etc.)

3. Through the development of local business clusters

The Porter/Kramer idea of encouraging companies to exercise their social responsibility by linking appropriate initiatives with profitable business models is as fascinating as it is forward-looking; in many ways, the idea of shared value for the corporate world and society opens up promising future prospects. However, the huge potential identified by Porter and Kramer cannot be fully harnessed for reasons that include the following:

1. Porter/Kramer confine the shared-value approach strictly to the level of corporate conduct and actions: "The concept of shared value can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates." If certain conduct and actions (here: "policies" and "operating practices") are to be sustained over a long period of time within a company, it is necessary to entrench the actions at the higher level of awareness and motivation (philosophy and culture).

2. Porter explicitly supports the pursuit of self-interest as a theory of motivation: "The power of entrepreneurship motivated by self-interest is much stronger than any other force that we can mobilize." This motivation theory impedes the creation of shared value at the expense of businesses and society more than it facilitates it.

3. There are strong interdependencies between corporate structure and organization on the one hand and the effectiveness of the shared-value approach on the other. The issue of corporate structure and organization is not addressed by Porter/Kramer.