How Great Companies think Differently, writing homework help
Assignments: Write a 2-3 paragraph paper describing learning take-aways from this article.
Business history provides numerous examples of
industrialists who developed enduring corporations
that also created social institutions. The Houghton
family established Corning Glass and the town of
Corning, New York, for instance. The Tata family es
tablished one of India’s leading conglomerates and
the steel city of Jamshedpur, Jharkhand. That style of
corporate responsibility for society fell out of fashion
as economic logic and shareholder capitalism came to
dominate assumptions about business and corpora
tions became detached from particular places. In to
day’s global world, however, companies must think
differently.
Globalization increases the speed of change; more
competitors from more places produce surprises
and shocks. An intensely competitive global econ
omy places a high premium on innovation, which
depends on human imagination, motivation, and
collaboration. Global mergers and acquisitions add
further complexity, with their success resting on how
effectively the organizations are integrated. Moreover,
seeking legitimacy or public approval by aligning cor
porate objectives with social values has become a
business imperative. Corporations that cross borders
face questions of cultural fit and local appropriate
ness; they must gain approval from governmental au
thorities, opinion leaders, and members of the public
wherever they operate. Their employees are both in
ternal actors and the company’s representatives in the
external community.
Only if leaders think of themselves as builders of
social institutions can they master today’s changes
and challenges. I believe that institutional logic
should take its place alongside economic or financial
logic as a guiding principle in research, analysis, edu
cation, policy, and managerial decision making. In
the following pages, I will describe six ways in which
great companies use institutional logic, how it gives
them an advantage, and how the perspective can
radically change leadership and corporate behavior.
A Common Purpose
Conceiving of the firm as a social institution serves as
a buffer against uncertainty and change by providing
corporations with a coherent identity.
As companies grow, acquire, and divest, the busi
ness mix changes frequently and job roles often vary
across countries. So what exactly gives a company a
coherent identity? Where are the sources of certainty
that permit people to take action in an uncertain
world? Purpose and values—not the widgets made—
are at the core of an organization’s identity, and they
can guide people in their efforts to find new widgets
that serve society.
Consider the Mahindra Group, an $11 billion multi
business company based in Mumbai that employs
117,000 people in 100 countries. Like many emerging
market enterprises, the Mahindra Group operates in
many industries, including automobiles, finance, IT,
and several dozen others. And like the great compa
nies, it invests in creating a culture based on a com
mon purpose to provide coherence amidst diversity,
proclaiming that it is “many companies united by a
common purpose—to enable people to rise.”
Idea in Brief
Traditional theories of the firm
are dominated by the notion
of opposition between capital
and labor, disconnecting busi-
ness from society and posing
conflicts between them. Ac
-
cording to this view, companies
are nothing more than money-
generating machines.
By contrast,
great companies
use a different operating logic.
They believe that business is
an intrinsic part of society, and
like the family, government,
and religion, has been one of
its pillars for centuries.
Great companies work
to
make money, but in their
choices of how to do so, they
consider whether they are
building enduring institutions.
As a result, they invest in the
future while being aware of the
needs of people and society.
There are six facets
of
insti
-
tutional logic,
which radically
alters leadership and corporate
behavior: a common purpose;
a long-term view; emotional
engagement; community
building; innovation; and
self-organization.
TEENS AND TwENTIES
1913
J.C. Penney introduces
a code of conduct that
urges employees “to serve
the public, as nearly as
we can, to its complete
satisfaction.”
1906
Upton Sinclair
publishes his exposé
of bad corporate
practices,
The Jungle,
provoking stricter food
safety regulations but
no improvement in
working conditions.
At many large companies,
mild profit-sharing and
stock-ownership plans
discourage unions and
unrest.
1914
Henry Ford’s “Five-
Dollar Day” dramatically
increases paychecks,
promising to turn workers
into consumers. Business
leaders denounce his
extremism.
About the
Spotlight Artist
Each month we illustrate
our Spotlight package with
a series of works from an
accomplished artist. We
hope that the lively and
cerebral creations of these
photographers, painters,
and installation artists
will infuse the pages with
additional energy and intel
-
ligence to amplify what are
often complex and abstract
concepts.
This month we showcase
Sarah Morris
, a British-
born American artist whose
emotive graphic paintings
consciously reference
architectural motifs. The
busy imagery hints at the
challenges individuals and
institutions confront in try
-
ing to stand out in the urban
“theater,” an apt comparison
with the effort that mission-
driven companies face in
trying to be recognized for
their efforts.
View more of the artist’s
work at
petzel.com/artists/
sarah-morris
.
PHo
TogrAPHy BElo
W: gETT
y imA
gES; ToP rigHT
: J
ASon SCHmiDT
HBr.org
November 2011
Harvard Business r
eview
69
How GrEAT ComPANIES THINk DIffErENTly
Spotlight
on The Good Company
Globalization detaches organizations from one
specific society but at the same time requires that
companies internalize the needs of many societies.
Establishing clear institutional values can help re-
solve this complex issue. For example, PepsiCo has
made health a big part of its aspiration to achieve
Performance with Purpose. Nutrition, environmen-
tal responsibility, and talent retention are pillars sup-
porting the slogan. Performance with Purpose pro
-
vides strategic direction and motivation for diverse
lines of business in many countries. It requires a
gradual shift of resources from “fun for you” to “bet
-
ter for you” to “good for you,” in PepsiCo parlance.
It provides a rationale for acquisitions and invest
-
ments. It is the logic behind the creation of a new
organizational unit, the Global Nutrition Group, and
new corporate roles, such as chief global health of-
ficer. It guides a quest to reduce or eliminate sugar
and sodium in foods and beverages. Above all, it pro
-
vides an identity for the people who work for Pep-
siCo all over the world.
Leaders can compensate for business uncertainty
through institutional grounding. Great companies
identify something larger than transactions or busi
-
ness portfolios to provide purpose and meaning.
Meaning making is a central function of leaders, and
purpose gives coherence to the organization. Insti-
tutional grounding involves efforts to build and rein-
force organizational culture, but it is more than that.
Culture is often a by-product of past actions, a pas-
sively generated outgrowth of history. Institutional
grounding is an investment in activities and relation-
ships that may not immediately create a direct road
to business results but that reflect the values the in-
stitution stands for and how it will endure.
Institutional grounding can separate the sur-
vivors from those subsumed by global change. A
sense of purpose infuses meaning into an organiza-
tion, “institutionalizing” the company as a fixture in
society and providing continuity between the past
and the future. The name can change, but the iden-
tity and purpose will live on. In 2007, Spain’s Grupo
Santander acquired Brazil’s Banco Real and folded
it into its Brazilian assets. But Banco Real’s spirit in-
volved much more than its financial assets. Its then-
CEO Fabio Barbosa was put in charge of creating the
combined entity, Santander Brazil. Although the
new organization faced pressure to increase branch
profitability, under Barbosa’s leadership Banco Re-
al’s focus on social and environmental responsibility,
along with its private banking model, were infused
throughout Santander Brazil and the parent.
Successful mergers are noteworthy for their em-
phasis on values and culture. When the merger of
two Swiss pharmaceutical companies formed Novar-
tis in 1996, CEO Daniel Vasella wanted the new com-
pany’s mission to be globally meaningful and central
to the integration and growth strategy. The question
was how to provide employees with a tangible ex
-
perience that reflected those values. When I floated
the idea of a global day of community service—un-
heard of in Europe at that time—Novartis agreed.
The company allowed each country organization to
determine how it wanted to serve local communities,
based on its interpretation of what the two histories
and one future would suggest. The day of service
has become an annual Novartis event, held on the
merger’s anniversary.
Affirming purpose and values through service is
a regular part of how great companies express their
identities. In June 2011, IBM celebrated its 100th
anniversary by offering service to the world. Over
300,000 IBMers signed up to perform 2.6 million
hours of service on a global service day. They con-
tributed training and access to software tools, many
of them developed specially for the occasion, to
schools, governmental agencies, and NGOs. Proj
-
ects included training on privacy and antibullying in
100 schools in Germany; a new website developed
in India for the visually impaired, with a launch at
50 locations; and access to small-business resources
for women entrepreneurs in the United States. The
company gave the tools away, even in cases where
the software could form the basis for commercial
products, to demonstrate IBM’s commitment to be-
ing a contributor to society.
Faced with a deep and
long-lasting crisis,
the public expects
the government to
ensure good corporate
behavior.
1935
Congressional investigations
reveal that on the eve of the
depression, executive pay
ran high, igniting debates
over how profits should be
shared among investors,
business leaders, and
employees.
1933
The new d
eal restrains
price competition, regu-
lates banking, and forces
companies to negotiate
with unions. most busi-
nesspeople oppose these
popular measures.
the great DepreSSion
70
harvard Business Review
november 2011
A Long-Term Focus
Thinking of the firm as a social institution generates a
long-term perspective that can justify any short-term
financial sacrifices required to achieve the corporate
purpose and to endure over time.
Keeping a company alive requires resources, so fi
-
nancial logic demands attention to the numbers.
However, great companies are willing to sacrifice
short-term financial opportunities if they are in-
compatible with institutional values. Those values
guide matters central to the company’s identity and
reputation such as product quality, the nature of the
customers served, and by-products of the manu-
facturing process. Banco Real, for instance, created
a screening process to assess potential customers’
societal standards as well as their financial standing.
The bank was willing to walk away from those that
did not meet its tests of environmental and social
responsibility. This short-term sacrifice was prudent
risk management for the longer term.
Companies using institutional logic are often
willing to invest in the human side of the organi-
zation—investments that cannot be justified by
immediate financial returns but that help create
sustainable institutions. In South Korea, after the
Asian financial crisis of the late 1990s, Shinhan Bank
set out to acquire Chohung Bank, a larger and older
bank that the government had bailed out. The mo
-
ment the acquisition was announced, 3,500 male
employees of a Chohung Bank union, whose ranks
extended to management levels, shaved their heads
in protest and piled the hair in front of Shinhan’s
headquarters in downtown Seoul. The acquirer then
had to decide whether to go ahead with the acquisi
-
tion and, if it did so, what it ought to do about Cho
-
hung’s employees.
Shinhan’s leaders applied institutional logic.
They negotiated an agreement with the Chohung
union, deferring formal integration for three years,
giving equal representation to both Shinhan and
Chohung managers on a new management commit
-
tee, and increasing the salary of Chohung employees
to match the higher wages of Shinhan employees.
The acquirer also handed out 3,500 caps to cover the
heads of the protestors. Shinhan invested heavily
in what it called “emotional integration,” holding a
series of retreats and conferences intended not only
to spread strategic and operational information but
also to foster social bonding and a feeling of being
“one bank.” According to financial logic, the acquirer
was wasting money. In terms of Shinhan’s institu-
tional logic, the investments were an essential part
of securing the future.
The result: Within 18 months, Shinhan had grown
both banks’ customer bases, and the Chohung union
was having a hard time fomenting discontent against
the benign acquirer. Although a formal merger
wouldn’t occur for another year and a half, Shinhan
and Chohung employees were working together on
task forces and discussing best practices, and ideas
were spreading that began to make the branches
look more similar. Employees were, in essence, self-
organizing. By the third year, when formal integra-
tion took place, Shinhan was outperforming not
only the banking industry but also the South Korean
stock market.
Emotional Engagement
The transmission of institutional values can evoke
positive emotions, stimulate motivation, and propel
self-regulation or peer regulation.
Utilitarian rationality is not the only force governing
corporate performance and behavior inside organi-
Supporting the war effort
is seen as a duty—or at
least as smart PR. Good
companies limit profits on
the matériel they supply to
the government.
When stability returns,
employment is idealized
as a compact between
worker and employer:
loyalty in exchange for
a job for life.
Technical innovation and
creativity, crucial to military
production, are important
criteria in the public’s defini-
tion of a good company.
Great companies identify
something larger than
transactions to provide
purpose and meaning.
WAr
TimE
Pho
ToGRaPhy: GeTT
y ima
GeS
hbR.oRG
November 2011
harvard business Review
71
Ho
W GrEAT Comp
ANiEs THiNk DiFFErENTL
y
Spotlight
on The Good Company
zations; emotions play a major role, too. Moods are
contagious, and they can affect such issues as absen-
teeism, health, and levels of effort and energy. Peo
-
ple influence one another, and in doing so they either
increase or decrease others’ performance levels, as
my study of teams and organizations on winning
and losing streaks reveals (see my book
Confidence
,
Crown, 2004). Well-understood values and princi-
ples can be a source of emotional appeal, which can
increase employee engagement. Having a statement
of values has become common, so the issue is not
whether a set of words called “values” exists some-
where in the company. Adhering to institutional
logic makes the regular articulation of values core to
the company’s work. The CEOs of companies I stud-
ied, whether headquartered in the U.S., Mexico, the
UK, India, or Japan, allocated considerable resources
and their own time to breathing new life into long-
standing values statements, engaging managers at
many levels in the institutional task of communicat
-
ing values. The point was not the words themselves
but the process of nurturing a dialogue that would
keep social purpose at the forefront of everyone’s
mind and ensure that employees use the organiza-
tional values as a guide for business decisions.
As a Procter & Gamble executive, Robert McDon-
ald had long believed that the company’s Purpose,
Values, and Principles was a cornerstone of its cul-
ture, evoking strong emotions in employees and
giving meaning to the company’s brands. Within
a month of becoming CEO in 2010, he elevated the
purpose—improving the lives of the world’s con-
sumers—into a business strategy: improving more
lives in more places more completely.
In P&G West Africa, for instance, every em-
ployee has a quantitatively measurable purpose-
driven goal: How have I touched this year? So P&G
West Africa’s Baby Care Group set up Pampers mo
-
bile clinics to reduce high rates of infant mortality
and help babies thrive. A physician and two nurses
travel the region in a van, teaching postnatal care,
examining babies, and referring mothers to hos-
pitals for follow-ups or immunization shots. They
also register mothers for mVillage, a text-
message
service (many of the poor in West Africa have cell
phones) that offers health tips and the chance to ask
questions of health care professionals. At the end of
each mobile clinic visit, everyone gets two Pampers
diapers. The emotional tugs for P&G employees are
strong; they feel inspired by the fact that their prod-
uct is at the center of a mission to save lives. They
also feel proud that Pampers’ sales have soared and
that West Africa is among P&G’s fastest-growing
markets.
In companies that think of themselves as social
institutions, work is emotionally compelling and
meaning resides in the organization as a whole
rather than in a less sustainable cult of personal-
ity. Top leaders exemplify and communicate the
company’s purpose and values, but everyone owns
them, and the values become embedded in tasks,
goals, and performance standards. Rather than de-
even advertising is seen
as playing a positive
social role. By making
people want more and
better things, the argu-
ment goes, ads raise the
standard of living.
Companies that
operate using
institutional logic
reap substantive
benefits.
InstItutIonal logIc
is built on a foundation
of purpose and values,
which serve as a buffer
against uncertainty and
change.
conceIvIng of the fIrm
as a social institution
generates a long-term
perspective. Short-term
financial sacrifice be-
comes permissible in the
interest of positioning
the firm for sustainable
success.
strong InstItutIonal values
can evoke positive
emotions, stimulate
intrinsic motivation,
and propel self- or peer
regulation.
The Benefits of Institutional Logic
1955
For businesspeople, big
becomes shorthand for
good. The first
Fortune
500
index of the largest compa
-
nies appears, with General
motors at the top.
Good companies
make good products:
appliances, cars, and
other conveniences
that improve the lives
of the burgeoning
middle class.
the fiftieS
72
harvard Business Review
November 2011
pending on charismatic figures, great companies
“routinize” charisma so that it spreads throughout
the organization.
Partnering with the Public
The need to cross borders and sectors to tap new busi
-
ness opportunities must be accompanied by concern
for public issues beyond the boundaries of the firm, re-
quiring the formation of public-private partnerships
in which executives consider societal interests along
with their business interests.
One paradox of globalization is that it can increase
the need for local connections. To thrive in diverse
geographies and political jurisdictions, companies
must build a base of relationships in each country
with government officials and public intermediaries
as well as suppliers and customers. Only by doing so
can companies ensure that agendas are aligned even
as circumstances—and public officials—keep chang-
ing. Those external stakeholders are interested as
much in the corporations’ contributions to the local
community as they are in their transactional capabili-
ties. At the same time, great companies want both an
extended family of enduring relationships and a seat
at the table on policy matters affecting their business.
Public-private partnerships to address societal
needs are growing in number and importance, and
are especially prevalent among enterprises that
think institutionally. Partnerships can take many
forms: International activities, conducted in col
-
laboration with the United Nations and other global
organizations (such as Procter & Gamble’s Children’s
Safe Drinking Water program with UNICEF and sev
-
eral NGOs); large domestic projects, undertaken in
collaboration with government ministries and devel-
opment agencies (PepsiCo’s agricultural projects in
Mexico with the Inter-American Development Bank,
for example); product or service development to ad-
dress unmet societal needs (for instance, P&G’s link
-
ages with public hospitals in West Africa); or short-
term volunteer efforts (IBM’s work following the
Asian tsunami, Hurricane Katrina, and earthquakes
in China and Japan to provide software to track relief
supplies and reunite families).
In companies that adhere to an institutional logic,
executives cultivate relationships with public offi-
cials neither as a quid pro quo nor to push through
particular deals. Rather, they seek to understand and
contribute to the public agenda even as they influ-
ence it. For example, PepsiCo’s chief global health of-
ficer, who came from the World Health Organization,
is planning a cross-sector project to reduce child
-
hood obesity. IBM’s CEO, Samuel Palmisano, circum-
navigates the globe six or seven times a year to meet
with national and regional officials, discussing how
IBM can help their countries achieve their goals. This
is not sales or marketing; it’s a high-level conversa
-
tion to demonstrate the company’s commitment to
furthering the development of the countries it oper-
ates in. Such engagement at the top helps other IBM
leaders get a seat at the table when discussions about
the country’s future take place.
1965
Ralph Nader’s
Unsafe
at Any Speed
exposes
disregard for safety
concerns at car compa
-
nies, raising consumer
awareness. Product
safety emerges as a new
standard of goodness.
1964
The Civil Rights Act passes,
and lack of discrimination
becomes the new ethical
bar that companies must
clear. A year later the first
black director joins a major
company board.
The Benefits of Institutional Logic
Great companies see business
as a primary pillar of society.
This focus facilitates the kind
of cross-border and cross-
sector engagement needed
to tap global opportunities.
Through the formation of
public-private partnerships,
firms consider the public
interest along with business
priorities.
the attention placed on
social conditions often
generates experiences and
ideas that lead to learning
for innovation in products,
services, and business
models.
in a Firm steered by institutional
logic, employees can be
treated as self-determining
professionals, coordinating
and integrating activities and
producing innovation through
self-organization in addition
to formal assignments.
The sixTies
Pho
TogRAPhy geTT
y ImA
ges, AP ImA
ges
hBR.oRg
November 2011
harvard Business Review
73
how Grea
T ComP
aNies ThiNk DiffereNTly
Spotlight
on The Good Company
Institution building requires the efforts of many
people. The more interested that top leaders are in
external relations, the more likely they are to involve
others and to reward them for building relationships
with the nation and community. Although relatively
few people might hold formal responsibility for
these external interfaces, a great many might per-
form institutional work by volunteering, attending
public meetings, and participating in community
service. Such activity projects a sense of authentic
motivation. Community building is not a hard sell
for people native to an area or for long-term resi-
dents; there is an emotional pull of place that makes
such work desirable. For others whose careers take
them across geographies, this work is a way to con-
nect their organizational roles with the places they
now live, making them feel more rooted.
When leaders come to see themselves as having
societal purpose, they can choose to get involved at
local, national, and even global levels. A few years
ago, the head of IBM Greater China organized a
personal diplomatic mission to Washington, meet
-
ing with White House officials and U.S. politicians
to discuss the impact of China’s emergence as an
economic superpower. He had a desire to see both
nations thrive and believed that his role in a global
company afforded him a unique perspective. After
retiring in 2009, he remained an IBM “super alum,”
in company parlance, and was supported by IBM in
attending a major U.S. university for a year, with the
company’s support, to learn about health care. At
the end of 2010, he returned to China and launched
an initiative with a Chinese government institute to
develop an IT-enabled evidence base for traditional
Chinese medicine that will build on IBM ties.
innovation
Articulating a purpose broader than making money
can guide strategies and actions, open new sources for
innovation, and help people express corporate and
personal values in their everyday work.
Companies’ claims that they serve society become
credible when leaders allocate time, talent, and re-
sources to national or community projects without
seeking immediate returns and when they encour-
age people from one country to serve another. IBM’s
Corporate Service Corp, for instance, develops fu-
ture leaders by sending diverse teams of the com-
pany’s best talent on monthlong projects around the
world. The attention placed on social needs often
generates ideas that lead to innovations. For Cemex,
operating by institutional logic and considering un
-
met societal needs produced innovations such as an-
tibacterial concrete, which is particularly important
for hospitals and farms; water-resistant concrete,
useful in flood-prone areas; and road surface mate-
rial derived from old tires, desirable in countries that
are building roads rapidly. An idea from Egypt for
saltwater-resistant concrete, helpful for harbor and
marine applications, became a product launched in
the Philippines.
Institution building helps connect partners
across an ecosystem, producing business model in-
novation. Cemex started Construrama, a distribu
-
tion program for small hardware stores, in 2001 as
a response to competition from Home Depot and
Lowe’s, which were then entering Latin America.
Construrama offers the small stores training, sup-
port, a strong brand, and easy access to products.
In accordance with its values, Cemex sought deal-
ers who were trusted in their communities, reject
-
ing candidates whose business tactics didn’t meet
the company’s ethics standards. Cemex owns the
Construrama brand and handles promotions but
doesn’t charge distributors, operate stores, or have
decision-making authority. It requires, however, that
as companies struggle
to survive “stagflation,”
efficiency becomes a
mark of goodness.
Under pressure from
global competition,
business leaders focus
increasingly on a single
measure of goodness:
shareholder value.
encouraged by the
success of Japanese
imports—and by
peter drucker—good
companies emulate
Japan’s quality-obsessed
industrial practices.
1978
The airline d
eregulation
act introduces competi-
tion to an inefficient
industry. major airlines,
unions, and safety advo-
cates all oppose the act,
but consumers like the
prospect of lower fares.
Companies’ claims that they
serve society gain credence
when they allocate resources
to community projects without
seeking immediate returns.
the SeventieS
the eightieS
74
harvard Business Review
november 2011
stores meet its service standards. Among those is
participation in community-building philanthropic
endeavors—expanding an orphanage or improving a
school, for instance. By the mid-2000s, Construrama
had opened enough stores to qualify as a large retail
chain in Latin America and was expanding into other
developing countries.
Creating opportunities for individuals to use com-
pany resources to serve society furthers institution-
building goals. Novartis employees serve in hospitals,
where they see firsthand the challenges of disease
and how their drugs are used. In 2011, P&G employ
-
ees set out in Tide Loads of Hope vans to visit com-
munities in the southern U.S. ravaged by floods. In
the mobile Laundromats, managers and other pro
-
fessionals washed and folded clothes for local peo
-
ple, getting to know them and their circumstances.
These kinds of interactions express corporate values
and produce valuable learning, too.
Self-Organization
Great companies assume they can trust people and can
rely on relationships, not just rules and structures. They
are more likely to treat employees as self-
determining
professionals who coordinate and integrate activities
by self-organizing and generating new ideas.
Institutional logic holds that people are not
paycheck-
hungry shirkers who want to do the bare
minimum, nor are they robots that can be ordered
to produce high performance. Instead, employees
make their own choices about which ideas to surface,
how much effort to put into them, and where they
might contribute beyond their day jobs. Resource
allocation is thus determined not only by formal
strategies and budgetary processes but also by the
informal relationships, spontaneous actions, and
preferences of people at all levels.
Fully understanding a company requires knowl-
edge of its social structure and informal networks,
and optimizing performance requires social in-
vestments. At Shinhan Bank, the two banks self-
integrated through social bonds and relationships
well in advance of the three-year mark when official
integration was to take place. The new connections
manifested in such actions as each bank’s volun-
tarily hanging the other’s banner in its headquar-
ters. At Procter & Gamble, managers in Brazil turned
strategic and organizational traditions on their head
to develop low-cost, high-quality alternatives to
premium products. They undertook this risky initia-
tive on their own and self-organized to ensure closer
cross-functional teamwork and partnerships with
customers. They felt that they had an obligation to
improve the lives of consumers who could not afford
premium products. Similar institutional logic led the
P&G Himalaya team, a global cross-functional group,
to find ways to make Gillette razors affordable and
desirable to men often bloodied by barbers using
rusty or worn-out blades.
Managers in great companies understand that
formal structures can be too general or too rigid to
accommodate multidirectional pathways for re-
source and idea flows. Rigidity stifles innovation.
Informal, self-organizing, shape-changing, and
temporary networks are more flexible and can make
connections between people or connect bundles of
resources more quickly. Employees’ formal roles
come to resemble the home base from which they
are continuously mobile as they carry out daily tasks
and projects, develop work relationships, and par-
ticipate in team or group activities. Matrix organiza-
tions—in which individuals report to two or more
bosses depending on the different dimensions of
their tasks—become what I dub a matrix on steroids.
People are accountable along many dimensions
1983
Fortune
publishes its
first list of “America’s
Most Admired Compa
nies,” based on a survey
of business leaders. The
tech and pharmaceutical
industries dominate the
top 10.
1981
President Reagan’s firing of
striking air traffic controllers,
combined with widespread
corporate layoffs, leads to
a dramatic falloff in union
influence over companies.
Articulating a purpose
broader than making
money can open new
sources for innovation.
The nineTieS
The idea of corporate
social responsibility,
which has been stuck in
academia for 40 years,
goes mainstream. Now
good companies create
CSR departments.
Silicon Valley’s
success redefines
the best companies
as the most inno
vative. Intel and
3M draw envy for
disrupting their
industries.
Pho
TogRAPhy geTT
y IMA
geS, f
AR RIghT
: AP IMA
geS
hbR.oRg
november 2011
harvard business Review
75
Spotlight
on The Good Company
simultaneously, attending to multiple projects
and using their networks to assemble resources for
all those projects, often without going through a
decision- making hierarchy.
Although there is a drudgery and confinement
component to many jobs—plenty of Cemex em
-
ployees work in factories, Shinhan’s banks have
tellers stuck behind counters, and every company
has stay-at-desk support staff—trusting people to
make choices about where, when, and with whom
they should work makes jobs more engaging. For ex
-
ample, on any given day about 40% of IBMers in the
U.S. do not go to an IBM office. They work at home
or at customer sites, moving between locations and
taking vacations at times of their choosing. IBM’s
work-at-home programs, such as the one started in
Japan in 2001, have caught the attention of govern
-
ments interested in keeping women with technical
degrees in the workforce. In some cases, IBM offers
allowances to support infrastructure in the home,
which has enabled a Harvard graduate working in
India to combine project work with child-rearing,
for instance, and a software manager from Egypt to
move with her husband to Dubai.
Institutional logic assumes that people can be
trusted to care about the fate of the whole enter-
prise—not just about their own jobs or promotions—
and to catalyze improvements and innovations with-
out waiting for instructions or sticking to the letter
of a job description. Job descriptions nowadays
document only part of what people do; performance
reviews and salary bands capture only some of the
activities through which people might add the most
value for the company.
When people self-organize to create networks to
share information, new initiatives or innovations are
often the result. Organizations must encourage the
creation of such networks, of course, and facilitate
them through communication platforms or meeting
spaces, but the networks usually flourish best if they
spring from volunteers who do things that bosses
might not have anticipated. What’s more, these self-
organized networks often keep good ideas alive long
after an organization would have abandoned them.
For example, three PepsiCo managers in Latin
America had shared a dream for around a decade of
developing new kinds of potatoes that were suitable
for southern climates, less starchy, and environ-
mentally sustainable. They felt that the initiative
should be based in Peru, the potato’s birthplace. The
troika remained in contact despite their moving to
different locations, and even after years of ho-hum
response, they presented their ideas wherever they
could. They eventually received a boost when a new
Peruvian potato chip whose creation they champi-
oned became a sensation. The chips, which used
multicolored potatoes from small farmers in remote
villages in the Andes, combined nutrition, tastiness,
and social contribution. Proof of concept turned the
dream into reality: In August 2010, CEO Indra Nooyi
announced the establishment of a global potato de-
velopment center in Peru, headed by one of the three
champions.
Self-organizing communities can be a potent
force for change, propelling companies in directions
they might not have taken otherwise. People with
no formal orders serve as explorers and entrepre-
neurs. For example, had it not been for self-forming
networks, IBM might have lagged behind or even
missed out on two big business ideas: virtualiza-
tion and green computing. These emerged as among
In a decade bookended
by burst bubbles, corpo-
rate reputations suffer
as the public directs its
anger at corruption and
executive pay.
1997
The public’s rising
awareness of sweatshop
labor and environmental
damage pushes corpora
-
tions like nike to keep a
closer eye on their global
supply chains.
Companies from Ge
to Walmart redefine
their missions to
include producing
social as well as
economic value.
Social entrepreneurs
and multinationals
see opportunities to
make money by find-
ing innovative ways to
solve problems in the
developing world.
Trusting people to
make choices about
where, when, and
with whom they
should work makes
jobs more engaging.
the new Century
pho
ToGraphy: GeTT
y Ima
GeS
76
harvard Business r
eview
november 2011
hBr.orG
Spotlight
on The Good Company
IBM’s top strategic priorities after an Innovation Jam
in July 2006, a web chat spanning several days to
which over 140,000 employees contributed ideas.
The virtualization initiative came together out
-
side of formal structures and, initially, as a voluntary
activity. Some 200 early adopters of virtual plat
-
forms—such as Linden Labs’ Second Life and similar
platforms—found each other through the company’s
chat rooms and created an ad hoc group of people
who shared ideas in their free time through avatars
and weekly phone calls, with conference lines some-
times open in the virtual world, too. After a year of
informal self-organization, the network found an
IBM executive sponsor. IBM then designated virtu-
alization an emerging business opportunity and pro
-
vided funding for it.
My arguMent
has come full circle. A logic that justi-
fies treating employees as self-determining volun-
teers—in essence, as true professionals who care
about high performance because they believe in the
company as institution—makes it important to have
a motivating purpose and values to provide coher-
ence and common identity. The first enables the last.
The six principles I describe in this article are inter-
related and share many characteristics. Especially
for great global companies, institution building is
not the result of carrying out specific activities but
a coherent, holistic pursuit in which elements rein-
force one another, are inextricably intertwined, and
“I was the firm’s cutting edge, pushed the envelope, did the heavy lifting, and was the rainmaker. Then I ran out of metaphors.”
“I was the firm’
s cutting edge, pushed the
envelope, did the heavy lifting, and was the
rainmaker
. Then I ran out of metaphors.”
reflect a logic and leadership style that permeate the
corporation.
Skeptics abound, of course. Firms that present
themselves as institutions concerned with serving
society often come under more scrutiny than oth
-
ers do, and they must withstand criticism about the
gap between stated aspirations and performance, fi-
nancially and socially. If they make money while do
-
ing good, they will be criticized for manipulation; if
they do some good but not enough to solve complex
problems, they will be criticized for lack of courage
or commitment. Despite a growing number of advo
-
cates for a new kind of capitalism that finds win-win
opportunities by creating value for both business
and society, there is still controversy over the obliga-
tions of business.
The great global enterprises are not waiting for
grand new theories or perfect answers. Their leaders
already use an institutional or social logic to supple-
ment economic or financial logic in guiding and
growing their enterprises. Institutional logic cannot
be captured by cost-benefit equations or reduced to
the language of economics, and yet it turns out to be
a powerful driver of financial performance.
Leaders in the great companies can tell a different
story about the basis for their decisions. In so doing,
they are able to produce new models for action that
can restore confidence in business and will change
the world in which we live.
hBr r
eprint
R1111C
CaRT
oon: TIm La
ChowskI
78
harvard Business Review
november 2011
hBR.oRG
Harvard Business Review Notice of Use Restrictions, May 2009
Harvard Business Review and Harvard Business Publishing Newsletter content on EBSCOhost is licensed for
the private individual use of authorized EBSCOhost users. It is not intended for use as assigned course material
in academic institutions nor as corporate learning or training materials in businesses. Academic licensees may
not use this content in electronic reserves, electronic course packs, persistent linking from syllabi or by any
other means of incorporating the content into course resources. Business licensees may not host this content on
learning management systems or use persistent linking or other means to incorporate the content into learning
management systems. Harvard Business Publishing will be pleased to grant permission to make this content
available through such means. For rates and permission, contact permissions@harvardbusiness.org.
Answers
Status NEW
Posted 11 Aug 2017 04:08 PM
My Price 10.00
----------- He-----------llo----------- Si-----------r/M-----------ada-----------m -----------Tha-----------nk -----------You----------- fo-----------r u-----------sin-----------g o-----------ur -----------web-----------sit-----------e a-----------nd -----------acq-----------uis-----------iti-----------on -----------of -----------my -----------pos-----------ted----------- so-----------lut-----------ion-----------. P-----------lea-----------se -----------pin-----------g m-----------e o-----------n c-----------hat----------- I -----------am -----------onl-----------ine----------- or----------- in-----------box----------- me----------- a -----------mes-----------sag-----------e I----------- wi-----------ll
Not Rated(0)