What is a corporation’s primary purpose? In an influential 1970 New York Times article, the economist Milton Friedman wrote…
Drucker Forum. The problem is that many corporations have driven the concept to an extreme. They’ve engaged in knee-jerk cost cutting when all slack has already been removed from the system. A company's primary responsibility is to serve its customers. Profit is not the primary goal, but rather an essential condition for the company's continued existence and sustainability
1. 1908 - A trapper boy, one mile inside Turkey Knob Mine in Macdonald, West Virginia. IMAGE: LEWIS HINE/LIBRARY OF CONGRESS 2. “A day’s work ended,” drawn by Matt Morgan, depicts African Americans bringing cotton in from a field in Alabama. The image was published in Frank Leslie’s illustrated newspaper in 1887. (Wikimedia Commons) 3. Triangle shirtwaist factory. http://usslave.blogspot.com/2012/12/triangle-shirtwaist-factory.html
http://www.cnbc.com/id/102508603 KPMG was commissioned by Vodafone to calculate what the economic impact of providing 16 weeks of fully paid maternity leave might be. The professional services company calculated that global businesses could save up to an estimated $19 billion each year.
Just replacing women who do not stay on in their workforce after having a baby, costs global businesses worldwide about $47 billion annually in recruiting and training costs.
Giving female employees 16 weeks of maternity leave on full pay instead of the statutory minimum would cost companies an extra $28 billion each year.
If companies could retain more female workers after their maternity leave, they could save up to $19 billion annually, while retaining the experience and knowledge of these employees with positive consequences for productivity and effectiveness.
Point of View I have
worked at 3 venture-backed companies. • One had an IPO. (2000) • One flopped. (2002) • One was acquired for $325 million. (2010) I have also worked at a small revenue-funded company. My company is 6 years old, profitable, and has no investors. I angel invest in early stage companies.
“There is one and only
one social responsibility of business – to use its resources and engage in activities designed to increase profits…” Doing anything else is “unadulterated socialism.” - Friedman
Quaker Oats president Kenneth Mason,
writing in Business Week, declared Friedman's profits-are-everything philosophy, “A dreary and demeaning view of the role of business and business leaders in our society." Wrote Mason: "Making a profit is no more the purpose of a corporation than getting enough to eat is the purpose of life. Getting enough to eat is a requirement of life; life's purpose, one would hope, is somewhat broader and more challenging. Likewise with business and profit."
A company's primary responsibility is
to serve its customers. Profit is not the primary goal, but rather an essential condition for the company's continued existence and sustainability. “A company's primary responsibility is to serve its customers. Profit is not the primary goal, but rather an essential condition for the company's continued existence and sustainability.” - Drucker
“If you feel, respectfully, that
you can get a higher return than the 38 percent you got last year, it’s a free country. You can sell your shares of Starbucks and buy shares in another company. Thank you very much.” Howard Schultz CEO, Starbucks
“You can't go to work
and think that business should just be about financial profits, because you'd be serving only a very one- sided view of what it means to be a human on the planet. And we live on the planet.” -Rose Mercurio CEO, Patagonia
"He's out there singing, 'Who's
going to save the world?' and those messages are right, you need to pay attention to the environment and education," he says. "I'm just adding, integrate your economic engine." (Photo: Jakub Mosur, Jakub Mosur Photography)
We’re Also Pretty Good at
Making Excuses It’s badass to work 16-hour days. There are no qualified, diverse candidates for the job. The people value kegs over a 401k. We can’t afford to cover healthcare. Our company is in a unique stage. That’s nice for a “lifestyle” company. Power through it, because we’ll all be so rich we’ll never have to think about money again.
The Startup Play-by-Play 1. You
start a company. 2. You raise capital. 3. Your company proceeds to: a) Flop early. 80% of companies fail in first year. b) Flop late. Shuts down or is acquired for less than capital raised. c) Do “ok.” Reaches profitability or sells for an acceptable sum. d) Become a wild success. Is acquired for favorable terms or becomes sustainable (reaches profitability, could be privately or publicly traded.)
Who Really Wins? Who loses?
Flops Early Flops Late Does “ok” Wild Success Investor • Still flies private • Kids go to college of choice • Has health insurance • Life is good Founder • Gets experience • Writes a Medium post on failure • Takes money off the table • Keeps the Porsche • Makes keynote speeches • Raises capital for next venture • Never has to think about money again Staff • Loses job • Still doesn’t have decent health care • Gains experience • May lose job • May actually lose money • Receives a small to medium check
Your product alone is not
going to change the world. Your long-term, sustainable company will change the world, if you design it well.
How The Playbook Came to
Be In 2015, we convened a broad cross-section of founders, thinkers, and doers to curate examples of new and creative business imperatives, and together, started writing a guide for the more human company.
Plated: Equity for All THE
COMPANY: 400 of employees; founded in 2012 THE POLICY: Plated offers full-time, non-exempt, hourly employees working in their fulfillment centers the opportunity to participate in an Equity Options program, at no cost to them, subject to a minimum eligibility period. HOW THEY DO IT: Plated administers this plan themselves, manually rather than outsourcing services. They believe it's important to provide a tailored approach to educating all employees on how the Equity Option Plan is structured, managed, and its potential value. “Every employee is an integral part of the Plated Team… we believe our non- exempt, hourly fulfillment center Team Members are our most important resource, as they are the closest to our customer…they are the back-bone of our company.” “
Pinterest: Options for your Options
THE COMPANY: 700 employees, founded in 2010 THE POLICY: People who have worked at Pinterest for at least 2 years and decide to leave for any reason are given 7 years to exercise their options instead of the usual 90 days. HOW THEY DO IT: Pinterest started by gaining alignment on their philosophy around retention and equity. They offer some questions other companies should ask themselves: Do you believe that equity is part of annual compensation and that your team should have access to it early? Or do you believe that it's intended to be a reward only if and when the company goes public or gets acquired? This philosophy will drive the decision. “We’ve just made it much easier for team members to leave in one of the most competitive recruiting environments of all time. But that’s a trade-off we got comfortable with.
General Assembly: We Have You
Covered THE COMPANY: 400 employees, founded in 2011 THE POLICY: General Assembly covers 90% of health insurance premium costs for every one of its U.S. employees. HOW THEY DO IT: GA was an early adopter of Sherpaa, the medical concierge service that acts as an insurance broker and provides employees with a dashboard through which they access physicians, insurance information, and more. This has given the company access to better rates (and reduced employee contributions), and also means GA employees have in-a-moment access to medical advice and resources. “Ping pong tables and beer kegs can be fun, but we’ve found candidates and employees most appreciate practical considerations like affordable monthly health benefits costs, eliminating their monthly phone bill, and the ability to take our classes for free.” “
The Muse: Taking the Pulse
THE COMPANY: 51 employees, founded in 2011 THE POLICY: The Muse covers 100% of medical insurance and 80% of dental insurance for our employees. HOW THEY DO IT: The Muse regularly surveys its employees to understand what benefits, social activities, and ideas matter most to our team. It's important to them that the team have a voice in decisions that impact them, and every time they’re asked, they give great feedback that allows the Muse to keep improving. “It's important for us as a company that our team is healthy and has good coverage; we certainly don't want them opting out of insurance because it's expensive
Change.org: Leave When You Need
It THE COMPANY: 300 employees, founded in 2007 THE POLICY: Change.org provides 18 weeks of fully paid parental leave for every new parent globally — regardless of gender, or whether the child is biological or adopted. Leave can be taken non- consecutively, within one year of the child’s arrival. HOW THEY DO IT: Change.org conducted a robust cost- benefit analysis. They believe building the right culture of support, and attracting and retaining top talent, far exceeds the policy’s cost. “Generous, paid parental leave eliminates the financial hardship of unpaid leave and ensures that all families are able to spend important time with new children. The result is that employees are less stressed, more engaged, and more productive when they come back to work.
Chartbeat: It Takes a Village
THE COMPANY: 98 employees, founded in 2009 THE POLICY: Chartbeat provides primary caregivers with 12 weeks of paid maternal or paternal leave, plus 4 weeks of transitional flex time at 100% salary. Secondary caregivers are eligible for 6 weeks paid leave at 100% salary. HOW THEY DO IT: Chartbeat suggests other small companies survey teams to ask them to prioritize benefits and perks. Employee opinions matter and it's up to leadership teams to craft a policy, like maternal and paternal leave, that makes sense for their company culture. “Chartbeat genuinely believes in creating an inclusive workplace, and that means building a company with policies that cater to everyone from our interns to seasoned employees.
360i: Doubling Down on Reviews
THE COMPANY: 800 employees, founded in 2004 THE POLICY: Rather than annual performance reviews, 360i employees conduct two self-reviews a year focused on what they want to be working on, where they want to go in the coming years, and how current assignments contribute to these goals. The company also ensures cross- functional knowledge sharing at a capabilities day where teams teach one another. WHY THEY DO IT: Instead of top-down management, 306i uses a “team of teams” approach. Aligning on goals on the individual and team levels provides the accountability and business context for 360i to thrive. “Our guiding principle is simple. we believe that alignment is the most important thing: What do employees want? What does company need? What do our clients need
Social Code: Learn the Code
THE COMPANY: 196 employees, founded 2010 THE POLICY: Every 8 weeks, SocialCode requires all new employees to attend a 3-day training that delves into the ins and outs of the company and industry. Each cohort graduates from the program with an understanding of how they fit into the big picture. The session culminates in a “forget the code” happy hour with the local office so new employees get to know their hosting office as well. WHY THEY DO IT: The program is led by SocialCode’s training team. Their advice: don’t aim to make your grassroots training program perfect, get it started and iterate. Employees are hungry and engaged, so feed them with your mission, vision and know-how. “This program gives employees the landscape to understand the impact they can and will have at the larger company and team level. Its larger reason for being is that we are a learning culture and this program is all about offering an open book to understanding SocialCode.