Sustaining Sustainability

Investing in the intangibles are what keep sustainability policies alive — and evolving.

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Leading Sustainable Organizations

Corporate adoption of sustainable business practices is essential to a strong market environment and an enduring society. What does it mean to become a sustainable business and what steps must leaders take to integrate sustainability into their organization?
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Steve Zaffron, the CEO of the Vanto Group and co-author of the national best selling business book, The Three Laws of Performance, believes that sustainability nirvana occurs when social responsibility moves from being expressed in one-off initiatives, siloed in the corporate CSR office, to a way of being and acting that is embedded in the company culture and work habits of employees. Achieving this kind of breakthrough in an established company, with its legacy systems and time-honored practices, is proving to be a tough nut to crack for many sustainability executives.

Zaffron has worked with a diverse group of organizations — from rocket-scientist NASA to labor-intensive mining — to achieve this kind of deep organizational renovation. His experience shows that leaps in human performance come less from tangible investments in things like automation, equipment or compensation schemes, and more through intangible transformations in the way people in organizations see themselves and others.

“It’s not an easy thing to change the way in which people see the world and themselves,” says Zaffron. “It takes time to develop.” And time is an underappreciated variable in sustainability. “It’s obvious when you say it, that sustainability means through time,” states Zaffron, but while perhaps obvious, managing time is a recurring sustainability challenge.

If it interjects itself in business sustainability, time usually appears as a constraint imposed by market short-termism. “We’re talking about long-term engagements that are substantial investments,” says Zaffron. “Managers have to know they’re in for the long haul.” Unfortunately, today’s sustainability management is dominated by the search for “quick wins,” which according to a 2008 report account for over two-thirds of corporate sustainability initiatives.

As opposed to the tangible “quick wins” mindset, the intangible benefits arising from embedded sustainability behaviors take sustained effort to produce. But over time, they create differentiated capabilities that can set your organization apart in the marketplace.

One of Vanto Group’s first clients, for example, was a copper company with 4,000 employees, three mines, 11 unions, and history of labor unrest, strikes and violence. The unions were founded to protect the workers from management, and management felt confronted by antagonistic union leadership. As Zaffron explains, “When you’re dealing with groups protecting themselves from one another, there’s not a lot of work getting done.” Despite years of animosity, underperformance and litigation, management and the unions could agree on one thing: the depressing future they faced if they didn’t alter the situation.

Instead of investing in tangible equipment or new mining shafts, the company instead invested in altering the intangible way people saw their roles and how they worked together. Transforming the business required changing the very rules they had developed to protect themselves from each other. It took three long years, but the result was a collective culture — and a company where the only people leaving were retirees. Efficiency and profitability boomed, with employees sharing in the gains. Satisfaction skyrocketed and union complaints plummeted by 60% or more. “A culture like this,” says Zaffron, “is inherently self-sustaining because it lives in the employees. They really experience this change, this new way of working together, and they don’t want to lose it.”

But the story doesn’t end here. As the company’s stock rose from $9 at the start of the process to $21 a share, it caught the attention of investors. A competitor ultimately bought them out with $28 a share offer. The 30% price premium was based on what the acquiring company called the “people technology.” “They could see something was different,” says Zaffron, “the unions, for example, created a 15-year labor agreement with management. That was unheard of in the United States.”

While the acquired company had a recognized value, the key asset lay in the intangible “people technology” and thus was hard for the new management to grasp. “The new owners didn’t really understand what it was that they had bought, other than the obvious physical aspects of it. Yes, they understood that the people worked differently, but they didn’t understand what was the source of it.”

The failure to comprehend the long-term intangible value became obvious with the next union negotiation. “The new owners interacted with the negotiation like they always interacted before,” says Zaffron, “which was not the way these people were now interacting. They had moved beyond negotiating and were working together to create whatever was needed for success, like the 15-year labor contract.”

When the game changed, much of the gains made over the previous three years evaporated for the new owners. But the intangible “people technology” persisted. “What didn’t go out of existence was what the people had discovered about work,” reports Zaffron, “and what they discovered was possible about work.” Employees began leaving because they wanted to find the same kind of possibilities in a new job or a new place. They refused to go backwards.

Oliver Wendell Holmes famously remarked, “A mind that is stretched by a new experience can never go back to its old dimensions.” Zaffron points to a similar idea. “The transformation was sustained in the lives and the work habits of the people themselves. Unfortunately, not in the company, because the supporting structures were dismantled.”

It’s a rare company that gets the lesson. Sustaining sustainability demands carefully managing both the tangible systems and structures of the company as well as intangible ways of being and acting that become embedded in the organizational culture.


Leading Sustainable Organizations

Corporate adoption of sustainable business practices is essential to a strong market environment and an enduring society. What does it mean to become a sustainable business and what steps must leaders take to integrate sustainability into their organization?
See All Articles in This Section

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Comment (1)
Michael D'heur
I agree that in these times of uncertainty and an ever accelerating push for short term tangible results, the underlying fabric of an organization is making the difference. The path to sustainable value creation is to re-engage people, as P&L statements are only one side of the equation.