Last week when writing about the importance of character over reputation, I made some reference to the work of Jim Collins. This week I wish to refer in a bit more detail about his book with Jerry Porras: Built to Last (2000). I had the pleasant opportunity to revisit this book and want to share with you insight of how visionary companies in the US and perhaps even elsewhere have been things to remain profitable and relevant to their clients and stakeholders. I couldn’t put this book down. Felt exactly the same way I felt when I first read it over a decade ago.
The most striking thing about visionary companies is that profit is not their sole or main objective. It is just one of their objectives. Their main objective is service to humanity. For a country where doing charity is a national value this is not amazing. (When I stayed in Illinois as a Fulbright Scholar between August 2016 and May 2017, I was amazed how Americans are kind to each other, with many donating to charity and stocking up food banks). Take for instance Johnson and Johnson who have a set of values (which they call their Credo) of which profit is the last in the list. Expounded by R.W. Johnson Jr in 1943, the credo places users of their products as the company’s priority: ‘We believe that our first responsibility is to the doctors, nurses, hospitals, mothers and all others who use our products. Our products must always be of the highest quality’. Second in the hierarchy are the workers: ‘Our second responsibility is to those who work with us. They must have a sense of security in their jobs. Wages must be fair and adequate’.
Next comes management: ‘Our third responsibility is to our management. Our executives must be persons of talent, education, experience and ability. They must be persons of common sense and full of understanding’. Quite ironically, Collins and Porras in their study discovered that contrary to popular belief, charisma is not required for the success of these visionary companies. ‘Indeed we found that some of the most significant chief executives in the history of visionary companies did not have the personality traits of the archetypal high-profile, charismatic visionary leader (p. 32)’. They give a few examples of illustrate this. One is William McKnight of Minnesota, Mining and Manufacturing Company (3M). Although largely unknown, he led this billionaire dollar company for 52 years as General Manager and then Chairman for 17 years. Another example’s is Sony’s ‘reserved, thoughtful and introspective’ Masaru Ibuka. Then there is the down to earth farmer from Iowa, Bill Hewlett of Hewlett and Packard. Messrs Procter and Gamble of Procter and Gamble were ‘stiff, prim, proper and reserved-even deadpan’. The most significant CEO at Boeing Bill Allen was just a lawyer with ‘a rather shy and infrequent smile’. So was the restrained George W. Merck who gave the world a pharmaceutical colossus.
Johnson and Johnson’s fourth responsibility is to its communities in which they live. ‘Our fourth responsibility is to the communities in which we live. We must be a good citizen-support good works and charity, and bear our fair share of taxes’. Finally, the company has a duty to its shareholders. ‘Our fifth and last responsibility is our stockholders. Business must make a sound profit’. This last bit of the credo is also packed with powerful goals: ‘Reserves must be created, research must be carried on adventures programmes developed and mistakes paid for. Adverse times must be provided for, adequate taxes paid, new machines purchased, new plants built, new products launched and new sales and plants developed. We must experiment with new ideas’.
This is a loaded paragraph that must be unpacked. The first thing that we see here is what today is known as corporate social responsibility, a norm which is taught in business schools across the world and for some companies is just a PR exercise. For Johnson and Johnson it is a benign commitment. Sound financial management was also required of the company executives. There had to be enough money generated with some set aside purely for research so that the company could better its products. That is why the company pledged itself to be adventurous and try new products. Innovation is a high value for this company and indeed most successful companies globally know that attention to product lifecycle is key to survival. Products must be reviewed from time to time. Companies like Ford and Toyota have mastered this. Serious companies thus have research laboratories. Interestingly, shareholders only get their share of the profit when all these things cited here have been done. It’s not all about money. It is not surprising that Johnson and Johnson has not only endured but grew by leaps and bounds since Robert W. Johnson Sr founded it in 1886 to become a household name. Its products are used in almost all countries of the world.
A cynical reader might just dismiss these ideas as mere deception of capitalism, for we know the US to be the bastion of capital and home to big multinational corporations that are notorious for messing up the world. Whilst it is true that the US has some of the world’s most rapacious companies, there are many ethical business models there too. Jim and Jerry, who both worked at Stanford Graduate School of Business, took several years to study these business giants that have been successfully operating for more than a century. Most of them were very scrupulous and from Johnson and Johnson’s credo you can see that it’s a self-regulating company. When a company self-regulates it does not need the prying eye of law enforcement officers. It does things properly and this is instilled in the workforce. They don’t cut corners. And profits are assured. Ironically, all visionary companies studied by the two professors were hugely profitable though profit making was not their main priority. If you doubt the profitability argument, consider this. These companies have made so much money over generations yet they are still operating. They could have simply closed shop. They have nothing more to prove and have made enough money that has been enjoyed across generations.
Surely they serve a higher value beyond themselves: They are committed to their communities. That is why in its mission statement another visionary company, Merck, stated that ‘We are in the business of preserving and improving human life. All of our actions must be measured by our success in achieving this goal (Collins and Porras, 2000, p. 88)’. It was thus not surprising that Merck once developed a drug for river blindness, Mectizan, and gave it away to millions of Third World citizens who desperately needed it. These things are also spiritual. Such benevolence attracts the grace of God. Business success is thus a natural consequence. Surely we can take a leaf from these American giants.