18 Aug #082 – Integriosity – Re-Imagined Implementation – Culture and Capital
ESSENCE: A Re-Imagined Culture aligned with Biblical beliefs, values and priorities can have important implications for the very nature of an organization’s activities, including how it understands, assesses and utilizes “capital”. A leader wanting to faithfully “do right” through business a better way must understand their role as a steward of all forms of capital (e.g., natural, social, human and financial) that drive the business and of its relationships with the stakeholders related to those forms of capital. Biblical stewardship is about obedience to the Creation Mandate–recognizing that God owns it all, has given it to us to steward, and is ultimately in control. We believe an organization that is aligning its Culture with Biblical beliefs, values and priorities should steward its capital in accordance with three key principles, Sustainability, Mutuality and Generosity.
Our last few posts have been Re-Imagining “upstream” from Culture–what are the important factors in Re-Imagining, defining and shaping the Culture of an organization. Ultimately, it is Purpose as translated through Values, and what matters is the real Purpose and the real Values, which may or may not be the lofty ones highlighted on the organization’s website. We also looked at what a Biblical Culture looks like, as well as the nature of the Purpose and Values required to cultivate a Biblical Culture.
In our last post (Culture and Products), we shifted from considering the factors that shape organizational Culture to begin looking “downstream” from Culture–the likely impact on an organization of Re-Imagining a Culture aligned with Biblical beliefs, values and priorities. It is worth highlighting once again the following observation from a recent McKinsey article:
Connecting purpose with the heart of your company means reappraising your core: the strategy you pursue, the operations driving you forward, and the organization itself. . . . Your stakeholders care about the concrete consequences of your lived purpose, not the new phrase at the start of your annual report.
Re-Imagining Implementation: Culture and Capital
As we have emphasized through many posts, a leader wanting to faithfully “do right” through business a better way must understand their role as a steward of the organization and the capital it utilizes. That stewardship responsibility comes from God’s command in the Creation Mandate:
And God blessed them. And God said to them, “Be fruitful and multiply and fill the earth and subdue it, and have dominion over the fish of the sea and over the birds of the heavens and over every living thing that moves on the earth.” (Genesis 1:28)
In post #041 (Righteousness–More than “Good”), we concluded that “doing right” faithfully means “doing right” by God, which boils down to living generously through loving others and stewarding creation. In post #046 (Lessons from Creation-Why We Are Here), we saw that, as stewards, we have global responsibility to use our God-given creativity and productivity to cultivate God’s creation in order to enable flourishing. We believe leaders of organizations of humans are called to steward in a way that Humanizes people, Beautifies the world and, in the process, Glorifies God.
What is the “creation” that an organizational leader is called to steward? It is everything needed, used or impacted by the organization in carrying out its activities, from the environment to raw materials to finances to humans to the communities that humans create. The “creation” that an organization needs, uses or impacts is the “capital” utilized by the business. In their book Completing Capitalism, Bruno Roche and Jay Jakub identify four key types of “capital” needed by a business: natural, human, social and financial (the thesis of the book is that the problem with “capitalism” is that business has focused on just one “capital” and failed to steward and manage appropriately the other three–for “capitalism” to work, it must be “completed”).
Re-Imagining Implementation: Stewarding Capital
We believe an organization that is aligning its Culture with Biblical beliefs, values and priorities must steward its capital in accordance with three key principles, Sustainability, Mutuality and Generosity:
- Sustainability applies across all aspects of an organization, including its utilization of all forms of capital that drive the business and its relationships with the stakeholders related to those forms of capital. We have frequently turned to Jeff van Duzer’s book Why Business Matters to God (And What Still Needs To Be Fixed), and its insights on the breadth of sustainability are worth quoting:
Sustainability, however, can be understood in a much broader sense as well. As a business pursues its purposes, it must do so in a way that is sustainable across all of the dimensions of its interactions with its stakeholders.
- The most important principle in stewarding an organization on God’s behalf is not to destroy it! An organization can die if:
- Leaders fail to foresee the organization’s dependence on a form of capital or fail to take steps necessary to identify sources of that capital and nurture those sources to ensure that they remain healthy and available.
- It runs out of financial capital (i.e., cash)–which is why profit is a necessary means for a for-profit business.
- It is unable to attract and retain qualified people.
- It is unable to secure natural resources, supplies of parts or distribution channels needed for its operations at prices that allow it to be profitable.
- It loses the trust and support of the communities in which it operates.
- Sustainability requires leaders to assess its usage, and the availability and health, of ALL the capital it requires to keep operating–natural, human, social and financial.
- What does sustainability look like across all forms of capital and taking into account all stakeholders? Interestingly, in Completing Capitalism the authors describe how the Mars Corporation (their employer) did a study to ensure that Mars was not extracting an unfair amount of profit at any stage of the value chain, thereby weakening the chain. Mars undertook this study because its leaders recognized that a weak value chain is not resilient (i.e., sustainable). This resulted in the development of an entirely new business model–the Economics of Mutuality (a very Biblical principle!).
- The most important principle in stewarding an organization on God’s behalf is not to destroy it! An organization can die if:
- From the perspective of faithfully “doing right”, mutuality is about an organization extending its culture of Shalom to all people it touches by managing all capital from a Biblical view of relationships, community, human dignity, human flourishing and the common good. Mutuality is about ensuring that transactions are “fair” to both parties, regardless of bargaining leverage.
- Of course, mutuality can be justified on a purely utilitarian basis as being good for long-term profitability, because it recognizes the complex ecosystems within which the organization operates and helps ensure sustainability and resilience of the ecosystems, which is good for the long-term health of the business. The authors of Completing Capitalism have created a robust economic model around the Economics of Mutuality, including methodologies for measuring natural, human and social capital (because leaders can’t manage what they can’t measure) as well as an abundance of online resources.
- For an organization aligning its Culture with Biblical beliefs, values and priorities, mutuality is simply the “right thing” to do AND it is good long-term stewardship of the organization’s broad capital.
- “To each is given the manifestation of the Spirit for the common good.” (1 Corinthians 12:7)
- “But seek the welfare of the city where I have sent you into exile, and pray to the Lord on its behalf, for in its welfare you will find your welfare.” (Jeremiah 29:7)
- “So whatever you wish that others would do to you, do also to them, for this is the Law and the Prophets.” (Matthew 7:12)
- “And as you wish that others would do to you, do so to them.” (Luke 6:31)
- “I will be a swift witness . . . against those who oppress the hired worker in his wages.” (Malachi 3:5)
- “Masters, treat your slaves justly and fairly, knowing that you also have a Master in heaven.” (Colossians 4:1)
- We have addressed the importance of generosity to faithfully “doing right” in several posts (including #044, #053 and #054). In fact, Integriosity comes from Integrity and Generosity. Generosity embodies the first principles of Love and Humility, which are the people-focused priorities that a leader needs to “keep first” in leading an organization to faithfully “do right”.
- As explained in post #044 (Righteousness–Living Generously), faithfully “doing right” requires more than “giving generously”–it requires the “vertical integration” of generosity by “living generously”. Living generously is about operating the organization (and, in the process, generating wealth) in a way that generously loves others and stewards creation. Living generously is living sacrificially—choosing to give something up or to forego a benefit because it benefits the common good–because it is faithfully “doing right”. In this respect, generosity is closely tied to mutuality–treating vendors, employees and customers more fairly than you might need to based on your bargaining leverage is living sacrificially–and it is faithful stewardship.
Only through faith can the market economy have a soul. (Zhao Xiao)
Re-Imagining Capital: Some Questions to Consider
As a leader Re-Imagines Culture and the implications for how their organization views and stewards capital, it is helpful to consider:
- Whether you have ways to measure and optimize use of capital other than financial (natural, human, social).
- Whether there are policies and practices designed to recognize the importance and unique contribution of every person.
- Whether less than a ”fair” profit is given to vendors, less than “fair” compensation is paid to employees, or more than a ”fair” price is charged to customers.
- Whether all the organization’s stakeholders understand its purpose and values.
- How the organization invests in its communities.
Imagine as You Re-Imagine
As you take the tools of RENEW and begin to RE-IMAGINE Culture, just imagine an organization that:
- Is environmentally conscious in its use of natural resources as well as in its disposal.
- Recognizes the importance and unique contribution of every person in the organization and the need to compensate each fairly.
- Treats vendors fairly in negotiations.
- Charges customers prices that are fair and reasonable.
- Ensures vendors, customers, personnel and the community understand its purpose and values.
- Invests generously in its community.
- Sets aside a percentage of its revenue or profit for charitable purposes.
It is important to understand that Biblical stewardship is about obedience to the Creation Mandate–recognizing that God owns it all, has given it to us to steward and is ultimately in control. Biblical stewardship is NOT:
- Motivated by fear of “existential” climate or environmental threats.
- Motivated by political agendas or narratives.
- Motivated by a desire to attract “conscience” capital.
- Motivated by cultural pressures or movements.
- Motivated by regulatory requirements.
Biblical stewardship is about faithfully “doing right”. We believe it is time for “business a better way” in alignment with Biblical values and priorities–it is time to begin faithfully “doing right” through Integriosity®.
SPOILER ALERT: In the next several posts, we will explore how Culture relates to Operations, Governance and Connection.
PERSONAL NOTE (from PM): In my 23 years of practicing law in the area of corporate transactions, I was involved in hundreds and hundreds of contract negotiations. It is difficult to recall situations in which my client or the other party didn’t try to negotiate the absolutely best deal they could given the relative bargaining leverage. Perhaps the widest “pendulum swings” in bargaining leverage I witnessed occurred in the area of leveraged finance. When it was a “borrowers market”, private equity sponsors pushed their banks hard for “covenant-lite” terms that omitted traditional restrictions, often playing banks off against each other. When financial markets tightened and became a “lenders market”, the same banks used their leverage to try to restore traditional covenants in transactions with the same customers (ironically, sometimes with loan officers who had “grown-up” in a covenant-lite world and didn’t understand traditional covenants). Neither borrowers nor lenders seemed to be considering what was best for the long-term “common good” of the leveraged loan market. It was “get all you can, whenever you can”.
A case study of an organization using bargaining leverage to squeeze vendors mercilessly was captured in a January 23, 2020 Wall Street Journal article about Apple’s procurement practices:
To understand Apple Inc.’s evolving place in the tech world, consider that one of its most important executives today is a guy whose job is badgering suppliers to get costs down. Tony Blevins, vice president of procurement, will stop at little to get a favorable deal. He has paraded manufacturers past competitors in Apple’s lobby and spurned a UPS contract by sending it back to UPS executives through FedEx. He persuaded subcontractors not to pay a chip maker that Apple was in litigation with, depriving the chip company of $8 billion, according to court documents and people who recall the case. . . .
Around 2012, Mr. Cook so valued Mr. Blevins’s work driving down costs that the CEO tapped him to manage negotiations for the glass encircling Apple’s futuristic new headquarters in Cupertino, Calif., people familiar with the project said. . . . He put bidders in conference rooms and went from room to room, pushing them to go lower. If you don’t come down in price, he said, another bidder would. He used familiar negotiation tactics, including prolonged silences and bluffing numbers, the people said. It worked. . . .
While Apple got what it wanted, such techniques can strain supplier relationships, some people familiar with his approach said. “His job is to Viking a town and get every resource out of it,” a former Apple colleague said of Mr. Blevins. “It’s like killing sheep versus shearing them.”
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Photo Credit: Original photo by Ivan Bertolazzi from Pexels (photo cropped).