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Published: November 29, 2005

 
 

The Realist’s Guide to Moral Purpose

Four ideals of leadership that appeal to our deepest instincts — and can inspire a company to long-term success.

Illustrations by John Craig
Everyone agrees that the performance of a company’s chief executive and top team has a decisive influence on long-term profitability. But what is it, exactly, that great leadership teams do? How do they create sustained competitive advantage in a firm?

Here the answers are not so obvious, but upon close observation, they become clearer. The most successful organizations, over time, are those in which people act consistently and decisively, innovating and building high-quality relationships. The task of leadership is to stimulate these kinds of actions, reliably and continually. The executives who can do this are not magicians. Consciously or not, they have learned how to deploy a conceptual tool that allows them to inspire and lead an organization toward enduring competitive advantage.

That conceptual tool is called moral purpose. A moral purpose is a value that, when articulated, appeals to the innate sense held by some individuals of what is right and what is worthwhile. For example, by all accounts, Sam Walton was a tough businessman, but at the company he founded, Wal-Mart, making money was secondary to another moral purpose: giving customers a good deal. He made his “associates” (as he called employees) feel that their work was worthwhile, by tapping into their natural good feelings toward fellow human beings. This in turn led them to treat customers in a friendly and helpful way, which (combined with his fierce pursuit of low prices) established the kind of customer loyalty that has been the central competitive advantage of his company. Mr. Walton could do this because he shared these feelings himself and communicated them at every turn. Indeed, his altruistic appreciation of his fellow human beings shines through his account of his own motivations (in his 1992 autobiography, Sam Walton: Made in America, written with John Huey, published by Doubleday):

[Our associates] learn to stand up tall and look people in the eye and speak to them, and they feel better about themselves…. Wal-Mart has helped their pocketbooks and their self-esteem. There are certainly some union folks and some middlemen out there who wouldn’t agree with me, but I believe that millions of people are better off today than they would have been if Wal-Mart had never existed.

Of course, outsiders may not always credit Sam Walton with altruism; they may attribute more ruthless self-interest to Wal-Mart than to other organizations. They may even have good reason for doing so. But that does not affect the degree to which an ideal of service drove Sam Walton and his employees during his lifetime, and made possible Wal-Mart’s success.

Moral purpose of a very different sort allowed Siegmund Warburg to build the financial firm S.G. Warburg into one of the top two merchant banks in London after World War II. This was a highly disciplined, innovative, and idiosyncratic firm. It was, for example, responsible for the first Eurobond issue (which was sold, characteristically, to a company no one else would have thought needed external financing), and for a series of hostile takeovers that offended more conventional European bankers. Mr. Warburg’s own name for his approach was “haute banque.” He strove for heroism, directly inspired by the writings of Friedrich Nietzsche, with the moral purpose of creating an aristocracy of elite financiers who would bring, as he put it, “the diverse potentialities of the human being to their highest possible level.” The drive to win and to achieve gave him and his firm capabilities that their competitors could not even begin to emulate.

Investor Warren Buffett, who similarly disdains the popular following of fashion in the stock market, has his own form of moral purpose. He seeks neither altruism nor heroism, but excellence. In his writing, he describes his purpose as being an artist, with investment as his canvas. He has never bothered to create an organization; his firm, Berkshire Hathaway, retains a tiny head office, for that is all that an artist needs.

 
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Resources

  1. Kenneth R. Andrews, The Concept of Corporate Strategy (3rd ed., McGraw-Hill/Irwin, 1971): Short classic arguing for strategies that appeal to the values of corporate leaders and employees.
  2. Ron Chernow, The Warburgs: The Twentieth-Century Odyssey of a Remarkable Jewish Family (Vintage, 1993): Comprehensive and very well-researched history.
  3. Lawrence Cunningham, editor, The Essays of Warren Buffett: Lessons for Corporate America (Cunningham Group, 2001): Mostly from Mr. Buffett’s letters to shareholders, which are also available on the Web at www.berkshirehathaway.com.
  4. Gary Hamel and C.K. Prahalad, “Strategic Intent,” Harvard Business Review (March 1989): First of their series of HBR articles relating corporate capability to moral purpose. Click here.
  5. Gerry Johnson, Kevan Scholes, and Richard Whittington, Exploring Corporate Strategy (7th ed., Prentice-Hall, 2005): Contains a useful section on more conventional stances on business purpose: short-term shareholder gain, long-term shareholder gain, maximizing the welfare of all stakeholders, or changing the world.
  6. Roger Lowenstein, Buffett: The Making of an American Capitalist (Main Street, 1996): Excellent biography of this excellence-driven investor.
  7. Alasdair MacIntyre, After Virtue: A Study in Moral Theory (University of Notre Dame Press, 1981): Influential and powerful history of the idea of life as a quest for fulfillment.
  8. Kevin Maney, The Maverick and His Machine: Thomas Watson, Sr. and the Making of IBM (John Wiley & Sons, 2003): Strongly recommended source on Mr. Watson and IBM.
  9. Allan Nevins, Ford: The Times, the Man, the Company (1954), Ford: Expansion and Challenge (1957), Ford: Decline and Rebirth (1962, all Scribner): Outstanding trilogy on Henry Ford and his company.
  10. Jay Ogilvy, “What Strategists Can Learn from Sartre,” s+b, Winter 2003: Introduction to existentialism as a moral purpose for managers. Click here.
  11. William Pollard, The Soul of the Firm (Zondervan, 2000): Autobiography of the former chairman of ServiceMaster.
  12. Sandra Vance and Roy Scott, Wal-Mart: A History of Sam Walton’s Retail Phenomenon (Twayne, 1994): Solid and useful perspective.
  13. Reggie Van Lee, Lisa Fabish, and Nancy McGaw, “The Value of Corporate Values,” s+b, Summer 2005: Corporate leaders describe ethical values as competitive advantage. Click here.
 
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