How to Do Well and Do Good

Rosabeth Moss Kanter, professor of business administration at Harvard Business School

Can companies do well by doing good? That question is asked frequently – but beware of false choices when considering it. In business, there is not a strict dichotomy between doing well and doing good; it is not an either-or proposition. Instead, social good and profitability are among the criteria by which companies make choices. In reality, any company is better off creating both bottom-line and societal benefits – and creating synergies between them.

That does not mean executives should lose sight of the goals and mission of the business, however. There is no reason certain kinds of good works – say, merely giving away money to areas unrelated to the business – should provide particular strategic advantage for a company. But if a company can integrate the benefits that it offers society more closely into its existing business, that integration can be very sensible and beneficial for the business. For example, people within the organization may recognize internal capabilities which they can build and develop to address a problem in society while simultaneously enlarging the company’s market.

As I describe in my book Supercorp, some smart companies are finding that including a focus on benefiting society in their mission can help yield competitive advantage. These companies, which are in the vanguard of creating a new business model, have discovered that a commitment to tackling societal problems can be one aspect of creating a corporate culture that leads to high performance and profits. (However, it is important to note that no company exemplifies this aspirational approach to management completely; all companies have flaws, and none live up to their ideals all of the time.)

There are a number of reasons why incorporating social good into strategy can help a company’s long-term performance. For one thing, it can help strengthen a company in the eyes of a number of important constituencies: its customer base, its employee base and the general public. In particular, a mission that includes serving society can help motivate employees – especially a younger generation of employees who seek meaning in work. Having strong values and a mission that incorporates social good can also help a multinational corporation maintain a cohesive culture despite a diverse global workforce, mergers and acquisitions, and fast-changing markets for the company’s products or services. (In other words, if a company has strong values, what exactly the company sells may change, but what it stands for does not.) Finally, thinking about societal problems can help spark innovative thinking by exposing employees to new ideas and perspectives.

The Procter & Gamble Company (P&G) provides a good example of how thinking about societal problems can help a company innovate within its traditional lines of business. P&G turned around and grew its business in Brazil by having employees live in and observe low-income households (an untapped market for P&G in Brazil at the time), creating numerous new products and product modifications, such as affordable, environmentally-friendly and hands-friendly detergent for those without washing machines who hand-washed clothes. The ideas spread to other countries and influenced the introduction of Tide Basic in the U.S. P&G employees attributed this success to the need to live up to the company’s purpose of creating products that “improve the lives of the world’s consumers” – which motivated them to see how they could contribute to improving lives of lower-income consumers in their country.

More generally, the reason many companies now want to enter emerging markets is because those markets are growing. But companies are discovering that there are so many social and environmental needs in emerging markets that those needs can be a good source of new product or service ideas that people will pay for, such as the ability to have access to banking services through a cell phone. Providing such services is good business – and yet also helps develop society.

In the long run, companies have to do some good for society to continue doing well financially. Fundamentally, companies that are not somehow doing good will eventually hit problems. Those problems may not be immediate, but one of the things technology has done is make information about a company’s behavior anywhere in the world more readily available to people all around the globe. We have more public awareness of what’s going on all over the world, and, in the Internet age, problems with a company’s behavior can get aired again and again.

If companies take a proactive approach, they can turn this increased consumer awareness into a benefit. Take Seattle-based Starbucks Corp. A number of years ago, some consumers began asking questions about the conditions in which coffee was grown and urging the company to carry fair-trade coffee. Since then, Starbucks has benefited greatly by consumers knowing that the company offers fair-trade coffee – and that Starbucks has a reputation for social responsibility.

The importance of benefiting society is not, however, a new phenomenon in business. Historically, businesses have always done well by doing good. If a company sold defective cars, it would not stay in business very long, so instead, car companies sell safety as one of their benefits, and safety is a societal good. Today, we take for granted many of the societal goods that companies supply.

Offering societal benefit does not necessarily mean doing things outside the realm of your business – and it is not restricted to only some types of companies. Consider the example of London-based Diageo plc, one of the world’s largest producers of alcoholic beverages, in Kenya, where Diageo’s East African Breweries Limited subsidiary launched a new beer that brought societal benefits. Traditionally thought of as part of a “sin industry,” beer does not seem like an obvious candidate for helping address social problems. But in Kenya, beer is popular, and cheap, unregulated home brews accounted for more than half of national alcohol consumption. Unfortunately, home brews using impure water and sometimes even laced with ethanol or battery acid had became a serious public health problem, causing lost productivity and even blindness because of the dangerous additives sometimes used. As a result, after it successfully introduced “Senator,” a popular, inexpensive beer brewed to international standards, Diageo was recognized in Africa for contributing to lower rates of blindness and increased workplace productivity.

For business leaders, thinking about creating societal benefits through business should be part of setting strategy; in today’s complex world, it has become part of a manager’s toolkit for growing and developing a business over the long term. It is no longer a sideline activity or an afterthought, but a mainstream imperative that influences every aspect of the business. If, as a business leader, you start thinking deeply about growing your company in the future – and where new markets are going to be – that means thinking about unsolved problems and unmet needs. Solving some of those problems and addressing some of those needs can, if done well, benefit both your company and the larger world.