Philosophy for Business, Issue 71, January 2012, ISSN 2043-0736

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Philosophy for Business, Issue 71, January 2012, ISSN 2043-0736

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Toward Corporate Preeminence: The Greatness of Corporate Soul Essay One of Three

© Sean D. Jasso, Ph.D.

Philosophy for Business, Issue 71, January 2012, ISSN 2043-0736

INTRODUCTION – WHY GREATNESS?

This first essay argues that every firm deeply rooted in mission and entrepreneurship seeks greatness – that is, transcendence toward superiority in delivering value, benchmark competitiveness within and beyond its industry, excellence in corporate accountability and, ultimately, lasting relevance from its domestic to global reach. The compulsion for the business enterprise to sustain excellence in performance remains a paradigm of the market economy. Indeed, it is competition that compels all economic organizations – from the multinational corporation to the household – to permanently innovate in order to remain viable to its many stakeholders. Why greatness? This bold question guides the forthcoming essays through evidence and discussion of two central pillars necessary for 21st century greatness: corporate governance – the system of values by which the corporation guides its mission and manages risk; and globalization – the philosophy of entrepreneurial reach for resources and markets around the world. The overarching aim is to challenge both the intellectual and practical authenticity of the corporation’s purpose in the 21st century and to strengthen our knowledge of the requirements and consequences of the firm that ascends to preeminence in 2020 and beyond.

In this installment, we begin with a discussion of the idea of greatness at first to lay the philosophical foundation of the claim that a firm’s aspirations of surpassing merely good performance must be imbued within the nucleus of the corporate culture and remain a central driver of the firm’s strategic vision. More practically, this essay argues that greatness, driven by superior expertise, is in fact within reach for all households, small businesses, multinational corporations, government institutions and nations. Simply stated, relentless commitment to hard work, practice, and perpetual endurance are the nonnegotiable, overriding ingredients for any corporation to move toward greatness. We discuss this seemingly simplistic, timeless and learnable formula at the outset of the essay anchored on the greatness of soul framework in Aristotle’s Nicomachean Ethics.

The catalogue of best practices for competitive excellence is the work of countless practitioners and academicians for much of the 20th century. Our most current management theory is the product of the last fifty, if not more recently, thirty years. The traditional MBA curriculum is a perfect example of the theoretical disciplines that serve as international standards of business and management practice – most of which have been shaped even more recently within the last twenty years. Although not new disciplines by any measure two of the more recent and influential phenomena to impact the management of the business enterprise are the ideas of governance and globalization. The remaining installments uphold Peter Drucker’s assertion that the business enterprise is a confluence of three dimensions – “an economic institution; a human organization; and an embodiment of values” (Ellsworth, p, ii)i. The values of the organization are essentially the rules by which the organization makes decisions about the right and wrong things to do and it is within the context of corporate governance that these

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values take root. In the second essay, we reflect on Archie Carroll’s model of corporate responsibility to guide the argument that superior governance is the grounding en route to greatness.

With the reality of international markets and resource allocation impacting business decisions more than ever before, the third essay discusses the idea of globalization arguing that greatness cannot escape the enduring practice of mastering the strategic issues associated with globalization. In other words, even exceptional local, regional and national organizations must not become complacent to the imminent demands of global competition. Simply defined, globalization is the global reach and consequences of worldwide commerce. For the first time in history, it is no longer possible for a business manager to be disconnected from global politics, economics and culture. In essence, managers without passports are veering toward irrelevance in a matter of time and managers who don’t study global opportunities will outright lose their effectiveness. In the third installment, we reflect on Pankaj Ghemawat’s model of global value creation to support the argument that the greatness of the firm is dependent on a cultivated global business model.

The consequences of business failure have become increasingly more compounded over recent years with a wider stakeholder base positioning their own success measures on the long-term sustainability of the primary corporation. The ultimate aim here is to provoke the entrepreneur, shareholder, manager, customer and the many entities who have a claim in an organization’s success – whether a hospital, non- profit organization, a multinational corporation or a small business – to evaluate and innovate their governance and global infrastructure. We conclude by introducing a practical assessment tool designed to elicit answers to the hard questions any astute stakeholder would require of the firm who envisions a competitive position – if not preeminent position – well into the future.

ESSAY ONE – THE IDEA OF GREATNESS

Why aren’t all corporations great? The simple truth is that greatness requires clarity of vision beyond that of the tangible life of the firm (we’ll call this corporate perpetuity), coupled with a soldier’s discipline of relentless perseverance of refining the overall value proposition and delivery method (we’ll call this entrepreneurial endurance), and, most importantly, a philosophical maturity rooted on the foundation of greatness itself (we’ll call this corporate soul). A rich literature supports the pursuit of excellence from the array of social, behavioral and management sciences that have shaped business curricula for decades. We look to a different, more timeless and rigorous science in the Aristotelian tradition of the great-souled man arguing that preeminence is not simply a clever goal, but rather the overarching end in and of itself.

We begin with a concise, analytical discussion of Aristotle’s Nicomachean Ethics – the definitive work on the nature of excellence by way of the virtuous life of the great-souled man. Written over 2300 years ago, Aristotle’s Ethics is the groundwork for serious scholarship dealing with the goodness of mankind. The Ethics accomplishes several goals in one comprehensive study namely introducing a careful analysis of what the ethical life actually is, why it is a life worth pursuing, and how to implement the ethics into practice. This theoretical foundation is complemented by Aristotle’s most recognized contribution to modern practitioners of ethics in the framework of the doctrine of the mean whereby the individual in pursuit of excellence has the free will to choose between two extremes of a given virtue (NEII)ii. For example, trustworthiness remains a valiant virtue worthy of practice not only because the extremes outside of the mean, boastfulness and self-deprecation, offer choices that diminish the authenticity necessary for rational decision making, but, more directly, truthfulness is paramount to fair or symmetrical market exchanges. It is this choice that serves our purpose in understanding greatness as the supreme aim for the corporation seeking not simply honor or prestige, but more importantly, lasting

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relevance measured by the integrity of character of management decisions necessary to ensure the perpetual vitality of the firm.

The pathway to corporate perpetuity, accepting this to be the ultimate aim of greatness, must be built on a foundation of lasting endurance in all things pertaining to the life and output of the enterprise – we regard expertise as the source. Ericsson, et al, assert that “the journey to truly superior performance is neither for the faint of heart nor for the impatient. The development of genuine expertise requires struggle, sacrifice, and honest, often painful self-assessment. There are no shortcuts” (p. 116)iii. Though technically possessing legal personhood and capable of far reaching influence often by brand power alone, the simplified version of a corporation is nothing more than people making decisions about risk and opportunity. The big question guiding the decision makers of the corporation is always what is the right thing to do? The moral manager attends to the rightness of decisions on the absolute knowledge of virtue imbued within his or her own cultivation and practice of ethics. When personal ethics are aligned with corporate ethics, not only is general management more effective, but strategic management, the wisdom and practice of long-term decision making, can be realized. Care must be taken to not veer toward a relative interpretation of ethics as this diminishes the authenticity of unconditional excellence. Excellence must first mean something universal, in our case, the influence and permanence of the well governed, global enterprise.

Corporate perpetuity is only possible with clarity of moral purpose – advanced by the ethics endowed by senior management and infused deeply into the culture of the firm. Otherwise, the very fundamental aspect of enterprise itself – economic competition – becomes corrupted by short-term benefits at the cost of long-term success. Wilson upholds, “the fundamental ethical question to be asked of any economic system is whether, taken as a whole and over the long-term, it will encourage or discourage good conduct” (p. 139)iv. Ethical legitimacy speaks to Drucker’s human and values dimensions ascribed to the enterprise noted earlier. Drucker’s third dimension upholds the firm as an economic institution, advanced later in Carroll’s model in our discussion on governance, and developed here within the framework of entrepreneurial endurance.

The political and economic system that best supports the idea of greatness is emphatically capitalism. To be clear, capitalism must be infused deeply and broadly within the social contract in which nations and regions espouse a political philosophy and shape public policy that values the freedom of the individual, understands the purpose of market competition, and defends the empowerment of the ownership of the means of economic production. These means include the access to the ownership and management of land, labor, capital, resources, knowledge and entrepreneurship. Much has been written in the defense of and the assault on capitalism. As we move toward a broader discussion on globalization and greatness in later essays, we will see that capitalism serves as the political economic system not only essential for corporate permanence, but also for national endurance. As De Soto asserts in his now classic argument on capitalism, “capitalism stands alone as the only feasible way to rationally organize a modern economy. At this moment in history, no responsible nation has a choice. ” (p. 1)v. Greatness requires a tested political economy where morality and legality uphold the benefits and costs of risk without which the idea of greatness has no framework to stand. Entrepreneurship is where we turn to understand how risk furthers corporate mission.

The classic illustration of the entrepreneur is the person who, given the freedom to do so, generates an idea to solve a problem, or to make a system, product or service better. This vision to see the promise of an idea and venture to risk time, resources, capital, and reputation is driven by a variety of incentives ranging from the imminent need to innovate or die in the marketplace, the fulfillment of one’s individual

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self-worth, the enhancement of personal and/or corporate wealth, or simply the elimination of boredom from the status quo. Fillis and Rentschler submit,

“Entrepreneurship has three central underlying dimensions: innovation, risk-taking and proactiveness. Innovation is the manner in which the entrepreneur searches for new opportunities or the way in which ideas are brought to a profitable conclusion. The test of innovation lies in its success in the marketplace of ideas, rather than in its novelty alone. Risk-taking refers to the manner in which innovation is embedded in the organization, society or community. It also relates to the willingness of people to commit significant resources to opportunities that are calculated to succeed. Pro-activeness is concerned with making things happen by perseverance, adaptability and by breaking with the established ways of doing things. Creativity involves a perceptual response to the environment which may induce a high or low frequency of creative endeavor (p. 50)vi.

Entrepreneurial endurance, therefore, is the energy required of the enterprise to adapt to the changing competitive external environment coupled with the ongoing challenges and opportunities within the internal organizational environment. Only with a determined entrepreneurial soul – or corporate soul as argued below – does the corporation have a fighting chance to flourish in its industry and win lifelong loyalty of its stakeholders. In essence, when entrepreneurship recedes corporate perpetuity fades.

First, let us understand the soul to be our inner source of moral judgment. Where the mind stores our knowledge, the soul stores our wisdom. As such, who is Aristotle’s great-souled man and how does he prescribe to characterize the path toward corporate greatness? Faulkner contends that, “a man of such virtue is too noble to stoop, or to accept the second best, especially in his own conduct. It is an ornament of good character that is also an exalting order: an ordering heightened by an awareness of the grand activities such soul calls for and is owed” (p. 20)vii. It is not to say that a life without excellence is not worthy of admiration or support, or that a business enterprise that provides only good value is unworthy of customer or investor loyalty. Rather, preeminent value must be separate from good value if we are to acknowledge that corporate perpetuity, and ultimately corporate greatness, is worth the risk from the outset. Hurka argues that this level of perfectionism, a close parallel to our greatness theme, is “consistent with the view that *greatness+ is an activity, *and must+ value the successful pursuit of goals beyond one’s death” (p. 112)viii. Some absolutes begin to surface with the idea of greatness whereby excellence has lasting impact beyond the conception and life of its origin. We can reflect on great people and organizations, for example, from the matriarchal grandmother whose legacy still inspires well beyond her life or the corporation whose late founder still shapes the very spirit of corporate culture so many generations later.

Aristotle’s purpose of illustrating the idea of the greatness of soul is, ultimately, to distinguish the promise of human flourishing as the result of virtuous wisdom. Similarly, we cannot ignore the promise of corporate flourishing as a benefactor of capitalism, as carefully defined above, whereby the idea of corporate soul is central to preeminence in the real world of economic competition. Great organizations, therefore, understand greatness as a laudable destination worthy of great risk and thus establish effective management systems to align resources to meet such risk, ruled by moral absolutes demanding excellence in conduct and performance. Perhaps what truly distinguishes the great-souled corporation is not only its perpetual influence in society, rather as Howland writes of the greatness of soul, the willingness to save the organization as a parent would save a child:

The noblest of deeds are those that merit the community’s highest tribute … these are in the first instance when the community is saved. Great-souled men are most worthy of honor because … they are considered to be the community’s greatest benefactors … For if there can be no deed more important than the saving deed, it would seem that there could be no virtue higher than the saving virtue (p. 42)ix.

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To be clear, the great-souled corporation, like the great-souled man, seeks excellence in delivering competitive, lasting value for excellence sake alone. This is unique to the lesser effort of ambition or simply the pursuit of lofty goals. We have argued that the wisdom of greatness is prerequisite to the advancement of preeminence. Accordingly, the clarity of wisdom ascribed to corporate perpetuity, entrepreneurial endurance and corporate soul firmly positions our forthcoming discussions where we will turn to the ideas of governance and globalization. The overarching aim of this series is to provide practical wisdom to the artful practice of effective management. Our applied assessment tool will offer answers to the difficult questions on how and why corporate preeminence is not only attainable, but resolute.

i Ellsworth, Richard R. (2002) Leading with Purpose: The New Corporate Realities. Stanford, CA: Stanford University Press.

ii Broadie, S. & Rowe, C. (2002) Aristotle: Nicomachean Ethics: Translation, Introduction and commentary. Oxford: Oxford University Press.

iii Ericsson, Anders K., Michael J. Prietula, and Edward T. Cokely. (2007) “The Making of an Expert”. Harvard Business Review, June 7, 85 (7/8), pp. 114-121.

iv Wilson, James Q. On Character. (1991) Washington: D.C.: AIE Press. v De Soto, Hernando. (2000) The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. New York,

NY: Basic Books.

vi Fillis, Ian, and Ruth Rentschler. (2010) “The Role of Creativity in Entrepreneurship.” Journal of Enterprising Culture, 18 (1), pp.

49-81.

vii Faulkner, Robert K. (2007) The Case for Greatness: Honorable Ambition and its Critics. New Haven: CT: Yale University Press.

viii Hurka, Thomas. Perfectionism. (1993) Oxford, UK: Oxford University Press.

ix Howland, Jacob. (2002) “Aristotle’s Great-Souled Man”. The Review of Politics, Vol. 64, No. 1 (Winter), pp. 27-56.

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