The end of economic growth … the start of social growth?

The business world currently stands at a crossroad:

(a) either try to return to the old ways of the nineties and the beginning of this century, or
(b) choose a fundamentally new way of doing business.

There are strong signs that option (b) has to be chosen:

• Scandals in the business world seem to be increasing both in frequency and in their negative impact on the economy. The financial crisis, which was caused, in part, by the bad behavior of banks, is a point in case.
• The era of continuing growth is at an end. Predictions for the Western world keep pushing the economic recovery back in time, and state that the exuberant growth of the nineties will never return. In addition, double-digit growth figures in Asia are becoming less common, and while emerging markets are growing, globalization means they are not immune to what happens in the developed world. These countries can therefore rely less on their exports as a means to grow.
• Much of the created value during the so-called boom years has been spent on projects that didn’t create much social value, but were squarely aimed at making short-term economic profit. See for an example the housing boom in Spain or the office space surplus in most Western countries. This means that society has not profited from sustainable benefits which could have been created.
• Eminent management researchers and writers are increasingly advocating that companies should change their focus from shareholders to stakeholders, and from trying to create economic value to creating social value, as the current economic model is no longer viable. Interestingly, Michael Porter and colleagues have shown that striving for social value actually makes economic sense as it, since as a side effect it also creates economic value.
• Generation Y, which has grown up in an era of abundance, now notices it is the first generation since World War II which will be, in general, less educated and certainly will earn less money than its parents. At the same time, this generation had the chance to notice there is more than work alone and that family and a livable environment are also important.

So it seems that business leaders don’t really have a choice and are ‘forced’ to go with option (b). The interesting thing is that this choice is actually beneficial, not only for the stakeholders (customers, suppliers, employees, government, society, and yes, shareholders) but for the company itself also. The High Performance Organization (HPO) research shows that HPO’s – defined as an organization that achieves financial and non-financial results that are exceedingly better than those of its peer group over a period of time of five years or more, by focusing in a disciplined way on that what really matters to the organization – actually puts its focus on stakeholders and on long-term sustainability and thus gains the advantage over its competitors. This actually causes the organization to do business in a different manner, which makes option (b) the natural way to go. The HPO research gives the four phases in which you can transform your organization into an HPO and as such can choose option (b). In the starting phase, the importance of and need for becoming an HPO is discussed with everyone in the organization and the benefits of the organization as HPO are visualized. In the preparation phase, a transition strategy is determined, and a team is assembled of people who will act as pioneers in the transition to HPO. During the execution phase, the transition strategy is put into practice. It is decided which transition activities will be performed in which order. Finally, in the perseverance & arrival phase, the organization checks whether it has improved its organizational results, and identifies additional and, if necessary, transformation actions. This phase is repeated until the organization reaches the HPO status, which is then, of course, celebrated with all stakeholders.

André de Waal, PhD, MBA, MSc, is Academic Director of the HPO Center, an organization which conducts research into high performance organizations. He is also Associate Professor of High Performance Organizations at the Maastricht School of Management, guest lecturer at Vrije Universiteit Amsterdam and Erasmus University Rotterdam, and visiting fellow at Cranfield University (United Kingdom). André has conducted several years of scientific research, examining 290 international studies and analyzing studies in 50 countries involving over 1,470 profit, non-profit and government organizations. His latest book, ‘What Makes A High Performance Organization’ is now for sales at Amazon.com and other booksellers.