When new CEOs are installed at companies, they’ll often set their agenda not by what they say, but by the questions they ask.
On becoming IBM’s CEO, Sam Palmisano only asked four questions in his first meeting. I think they’re brilliant and that his method of asking questions first is the approach we don’t see enough of. His questions are:
- Why would someone invest in us?
- Why would customers buy from us?
- Why would someone work here?
- Why would society allow us to operate?
It’s the last question that is the most important one and the one that underpins the other three. In fact, I believe that Mr. Palmisano could have simplified his list by just focusing on the last one. It’s a question that’s far too hard for most companies and most executives. A shame, given what we now pay CEOs.
No, “so shareholders can make money” isn’t a good answer. That hasn’t been the right answer since robber baron capitalism. And the reason that business has to operate in such a heavily-regulated environment is the result of being unable to answer that question to the satisfaction of society.
Unfortunately, many managers (I won’t use the term “leader” here, because they’re not) refuse to acknowledge the wake their corporations can leave. There’s an impact to society in how you use natural resources. Or in the hiring practices you have. Or in your selection of outsourcing partners. All these things can have a negative or a positive impact on society, but you’ve got to think about them. Society has an obligation to act on the things that you forget to do.
The consideration only (or primarily) of the fiduciary responsibility to shareholders is what generates the unwanted regulation. Society, when it sees businesses acting only in self-interested ways, will react with regulations. The more self-interest exhibited, the more regulation.
Ultimately, the corporation exists only because society allows it to exist through the laws that allow the formation and continued existence of those corporations. Ask GE what it was like to have to clean up the Hudson River after working only in a self-interested fashion for many years.
Why should society allow your company to exist? Does your CEO know the answer? If not, why?