Corporations Will Shape Our Future Values
If the impact and relevance to the world of the U.S. federal
government is 1.0, then what is the potential impact and relevance
of your company? I recently put this question to the chief
executive of a leading Fortune 500 media company.
His answer: Three times that.
Think about that for a moment: a single corporation with three
times more impact, relevance and importance than the U.S. government.
Is he right? Perhaps three times is a bit high. But whether it
is 3x or 1x or 0.5x, the order of magnitude highlights a profound
evolution that has taken place over the last 150 yearsnamely,
the rise of the corporate state as one of the most powerful forces
on Earth. This trend will accelerate into the next century, to
the point where well-managed corporate entities will be the primary
pistons not only of economic progress, but also social change.
The well-managed corporation is the most significant commercial
invention of the 20th centurymore significant than electrical
lighting, the Model T, jet aircraft, the computer or the Internet.
Without well-managed corporations, we could not have had these
innovations in the first place, at least on a large scale.
Yet, 100 years ago corporations did only a small fraction of the
world's work. Certainly, a few large corporations existed, notably
Standard Oil of New Jersey and U.S. Steel, but these were unusual.
Family farms, mom-and-pop stores and sole proprietorships dominated
the economic landscape.
There was no Fortune magazine or Business Week.
The Harvard Business Schoolthe consummate symbol of the
corporate statehad not even come into existence. In fact,
there was not a single MBA-degreed person on the entire planet.
Management itself had not even been identified as a central function
By midcentury, this had all changed. Management became
a distinct and accepted concept, thanks in large part to the insight
and writings of Peter Drucker. Many of our brightest young minds
began to see management as a viable and legitimate career path.
During the first half of the 20th century, talented executives
at such companies as General Electric Co., General Motors Corp.
and Procter & Gamble Co. developed management into an understandable,
repeatable activity. By the 1990s, 700-plus MBA programs generated
more than 80,000 graduates per year in the United States alone.
In the second half of the 20th century, the ability to manage
complex organizations became a widely distributed skill. People
learned how to apply this skill not only to for-profit corporations,
but also to universities, health care systems and just about any
other productive activity. In a sense, all organized activities
Instead of red-brick school buildings, we built large school systems.
Universities grew from hundreds of students to tens of thousands.
Managed-care organizations replaced the family doctor, and hundred-person
law firms replaced the practicing attorney.
Even the pure nonprofit sector became corporatized,
as its executives eagerly sought to apply the best corporate practices
to their work. The Salvation Army, the Nature Conservancy, the
Boys and Girls Clubs of Americathese organizations became
as systematically managed as any Fortune 500 corporation.
The modern megachurch, which is rapidly gobbling up spiritual
market share, is entirely a corporate concept. One regional church
Ive worked with draws 17,000 worshippers a weekend, has
a paid professional staff of almost 600, and uses the words customers,
value delivery and strategic planning
with as much ease as any McKinsey consultant. In fact, its executive
pastor is an ex-McKinsey consultant.
The point is that well-managed corporate entitiesbe they
for-profit or not-for-profithave become the dominant productive
vehicle in society. And now we've reached a point where a leading
chief executive can conceive of his company having three times
the importance and relevance to the world of the U.S. federal
This raises profound questions of executive responsibility. At
the turn of the past century, corporate entities felt little need
to be responsible citizens. By midcentury, a few visionary companies,
such as Johnson & Johnson and Merck & Co. Inc., identified social
responsibility as an explicit corporate objectivea radical
step at the time. By the late 20th century, stakeholder
responsibility had become an objective at the vast majority
of companies and a central tenet taught in MBA programs.
But is social responsibility a high enough standard? With the
corporate model becoming the dominant vehicle of human productivity,
might corporations need to shift from being socially responsible
(adhering to society's values and rules) to socially progressive
(consciously shaping societal values)? As examples: A media company
could use its programming to advance gender equality; a running-shoe
company could promote health consciousness; a soft-drink company
could use its brand name to champion global citizenship; a computer
company could use its power to influence the way schools teach
A scary thought, to be sure, and one that should give us pause.
But let's be realistic. Corporations already do shape societal
values to a large degree.
For good or bad, CNN, Nike, Coca-Cola and Microsoft are powerful
cultural forces. Furthermore, corporate executives are in a superb
position to accelerate social progress through their actions.
The shattering of the glass ceiling at Hewlett-Packard Co., where
more than one-quarter of its managers are women, including its
recently appointed CEO, is just such an example.
Nor is it just huge companies that have the power to influence.
Consider Patagonia, a privately held outdoor clothing company
that explicitly views itself as an activist for environmental
causes. Not only does Patagonia pioneer environment-friendly products,
such as organic cotton and jackets made from recycled plastic
bottles, but it also funds dozens of environmental organizations
with 1% of its annual sales skimmed right off the top as a self-imposed
As government continues to lose moral authority and practical
effectiveness, the corporate state will increase its value-shaping
role. Some of us may not like that fact, but it is a fact nonetheless.
So, those with executive responsibility face two options. On the
one hand, they can choose to ignore the potential for a wider
role of their companies and forgo the opportunity to rethink the
very purpose of their corporations. And manyperhaps mostwill
choose this first option, for in every evolution there are those
left behind, the perpetual laggards.
For others, there is the second option: to replace the tired debate
about stakeholder responsibility with invigorating
dialogue about what the role of their corporations should be and
can become in the next century. They will choose to embrace the
opportunity for a more progressive roleto see their corporations
explicitly as value-shaping entities of the world they touch,
while simultaneously keeping their economic engines well tuned
I believe the very best will evolve toward this second option.
And they, in turn, will teach the others, in the way that the
best have always taught: by the inspiration of example.
Copyright © 1999 Jim Collins, All rights reserved.