The Good Company
This past year was a year of frenzied list-making. Magazine editors could not let an issue pass without trotting out "the 1,000 most significant this-or-that of the millennium," or "the 100 greatest something-or-other of the century," or "the top 10 whatever of the year."
As a child, one of my favourite radio programs was "Desert Island Disks." It thrilled me to listen to an interesting person explain why they would pick a particular list of 10 long-playing records (this was before CDs). And, since this was before we had a television, I remember my family sitting around the fireplace during winter, making lists of the 10 people from history that we would like best as dinner guests and wondering who should sit next to whom to make for the best table talk.
Clarifying what we value
Why do we enjoy making such lists and choices? Lists and choices help us to clarify what we value. Abstract principles and standards are necessary and important, but it always helps to be able to give a principle a face or to link a standard to a story.
The business magazines did not escape the 1999 list-making frenzy, although they at least have the excuse of making lists every year anyway. Here is a summary of just four of the 1999 Canadian business lists, with their ranking criteria and each of their top fives:
The Financial Post 500 and Canadian Business Performance 2000 (both ranked by revenue): General Motors, BCE, Ford, Nortel, and Chrysler.
The Globe and Mail Report on Business Top 1,000/Canada's Power Book (ranked by profit): BCE, Thomson, Royal Bank, Bank of Nova Scotia, and Seagram.
- The Profit 100 (ranked by five-year growth): TLC (The Laser Centre, a laser eye surgery company), Equisure Financial Network (a brokerage firm providing cross-Canada insurance), TUCOWS Interactive (an Internet access and advertising firm), Virtek Vision (a provider of laser templating and imaging systems), and SunBlush Technologies (fresh produce processors and distributors).
All of these lists, and most other well-known lists, such as Fortune 500 and Fortune Global 500, value companies by a single measure: big money. Big sales revenue, big profit, big growth. The message is: a good company is one that can show the money.
Very few people would argue that money is the only measure of a good company, although it certainly is a necessary business measure. As Peter Drucker, the father of contemporary management theory, says:
Profit, to be sure, is not the whole of business responsibility; but it is the first responsibility. The business that fails to produce an adequate profit imperils both the integrity of the resources entrusted in its care and the economy's capacity to grow. It is untrue to its trust. At the very least, business enterprise needs a minimum of profit: the profit required to cover its own future risks, the profit required to enable it to stay in business and to maintain intact the wealth-producing capacity of its resources.
But money can never be an adequate measure.
Does this mean that your Good Company is as good as my Good Company? Can anybody just dream up a list of good companies by whatever measure they please? Are the standards for good work and good business entirely arbitrary?
No. The measures by which we must rank good companies are not arbitrary. The standards for business are not the product of our supposedly autonomous human reason. We do not make up the standards for business as we go along.
There is an intelligent design to economic life, given in the structure of reality. Just as physical objects are subject to certain laws, so businesses are subject to certain laws. And these economic laws do not change at the national border, on the whim of governments. They are imbedded in the patterns of creation.
I find this statement in the contemporary Christian testimony Our World Belongs to God helpful in my efforts to identify a more adequate standard for measuring the Good Company: "We must work for more than wages, and manage for more than profit, so that mutual respect and the just use of goods and skills may shape the work place, and so that, while we earn or profit, useful products and services may result."
This reflects a standard for business that goes over and above personal opinions and community traditions and national laws and international treaties. It reflects a standard evident in the patterns of creation.
And so, if I was to draw up a Good Company list, these are the values by which I would benchmark (not necessarily in any order):
- people who earn well, but work for more than wages;
- managers who take care to realize a profit, but manage for more than profit;
- an atmosphere of mutual respect;
- just use of goods and skills; and,
- useful products and services.
Giving principles a face
How do we give these principles a face? How do we link these standards to a story? Do we try and draft a Good Company list? It would certainly not be easy to put together such a list. The criteria are few and appear simple, but to evaluate a company according to these criteria would not be a simple task. The research necessary to track down eligible companies would be a prodigious effort. The usual business lists have at least this virtue, that once you have the numbers lined up, ranking is easy!
Happily, we do not need to draft a Good Company list for our purpose of giving principles a face and linking standards to a story. Nor do we have the impossible task of tracking down The Perfect Company. We can accomplish our purpose by tracking down companies who are making credible efforts to live and work up to more adequate standards than just revenue, profit, and growth.
One company that does a meticulous annual internal evaluation is the power producer and distributor AES Corporation, a global company with its sparsely staffed head office in Arlington, Virginia. Founded in 1981 by the former head of the U.S. Federal Energy Administration, Roger Sant, and his deputy, Dennis Bakke, AES brought its first power plant on-line in June 1986.
By 1998, AES had grown to at least 118 power plants producing over 36,000 megawatts and ten distribution companies serving millions of people in 16 countries, including Brazil, Hungary, Pakistan, the U.S.A., and Kazakhstan. Revenues in 1998 were $2.4 billion, total assets nearly $11 billion, operating income $733 million, and net income $311 million (all figures in US dollars).
AES is clearly no laggard when it comes to profit. But it is not profit-driven. CEO Dennis Bakke explains:
Where do profits fit? Profits . . . are not any corporation's main goal. Profits are to a corporation much like breathing is to life. Breathing is not the goal of life, but without breath, life ends. Similarly, without turning a profit, a corporation, too, will cease to exist.
Rather, AES is driven by four values: integrity, fairness, fun, and social responsibility. In classical Christian terms, the same values could be referred to as shalom, justice, calling (or vocation), and stewardship.
Sant and Bakke explained these shared principles in the prospectus to AES's initial public offering as follows:
Integrity. AES has attempted to act with integrity, or "wholeness." The Company seeks to honor its commitments. The goal has been that the things AES people say and do in all parts of the Company should fit together with truth and consistency.
Fairness. The desire of AES has been to treat fairly its people, its customers, its suppliers, its stockholders, governments, and the communities in which it operates. Defining what is fair is often difficult, but the Company believes it is helpful to routinely question the relative fairness of alternative courses of action. AES has tried to practice its belief that it is not right to "get the most out of" each negotiation or transaction to the detriment of others.
Fun. AES desires that people employed by the Company and those people with whom the Company interacts have fun in their work. AES's goal has been to create and maintain an environment where each person can flourish in the use of his or her gifts and skills and thereby enjoy the time spent at AES. [Elsewhere Sant argues that "Fun happens when you're intellectually excited. It's people interacting with each other—with one idea leading to another—and getting frustrated if there isn't an answer. It's the struggle, and even the failures that go with the struggle, that make work fun."]
- Social responsibility. The Company has acted on its belief that AES has a responsibility to be involved in projects that provide social benefits, such as lower costs to customers, a high degree of safety and reliability, increased employment and a cleaner environment.
These values grow out of a set of beliefs about people and their role in the workplace. AES recognizes individuals as:
- thinking, creative, and capable of making hard decisions;
- willing and able to assume accountability and responsibility;
- unique and deserving of special treatment;
- fallible, even intentionally at times;
- positively disposed to work in groups; and
- eager to make a contribution or to join a cause.
Unlike many values statements, the AES shared principles function as more than pious lies. They are made operational in the structure and practices of the entire organization. They are held strongly, so much so that the US Securities and Exchange Commission required AES to mention its values as a risk factor in its IPO prospectus, as follows: "If the Company perceives a conflict between [its] values and profit, the Company will try to adhere to its values—even though doing so might result in diminished profits or foregone opportunities."
AES would be the first to acknowledge that it often fails by its own measures. But it tries seriously, and keeps track of its efforts, successes, and failures. AES uses four measures to assess its performance, and reports on these measures in its annual Letter to Shareholders:
Shared values. How did we do in having an organization that is fun, that is fair, that acts with integrity, and is socially responsible?
Plant operations. How safe, clean, reliable, and cost effective were our facilities?
Assets. What changes occured in our assets, including AES people, during the year? That is a measure of our project development and construction progress and an indicator of future earnings potential.
- Sales backlog. What happened to our backlog of contract revenues during the year? This is one indicator of success in business development activities.
To measure its success in living up to its values, AES conducts thorough annual surveys among its employees, customers, shareholders, and government and communications representatives. To measure employee views on the extent to which AES lives up to its value of fun, for instance, the values questionnaire asks them to rate AES on a scale of one to five in terms of each of the following three statements:
- We work because the work is fun, fulfilling and exciting and when it stops being that way we will change what or how we do things;
- We want an environment where people can grow and develop by using their gifts and skills to the maximum extent possible;
- We try to decentralize the authority and responsibility for getting a job done to the level of the person actually doing the work.
AES is not perfect. It makes mistakes, and sometimes it willfully does the wrong thing. But it is going in the right direction.
Becoming a Good Company does not mean trying to copy a company like AES. It does mean measuring up to the unchanging standards for economic life—standards built into reality. As the ditty goes: "Methods are many, principles are few. Methods change often, principles never do."Subscribe