Atomic will be nineteen years old this June. Part of my journey over those years has been figuring out ways of doing business — and being a leader — that both work and align with my personal values. Fairly often, that has meant questioning the status quo and finding alternatives to the way business “should” be done.
I have degrees in electrical engineering. I’ve taken no business courses at all, and yet I somehow picked up many of the conventional notions about business. I think these ideas are so widespread and well accepted that we all absorb them passively and take them for granted.
Creating a company from scratch has been a journey of uncovering, questioning, and (when necessary) finding alternatives to these assumptions and practices.
This post is a reflection on that journey and a guide to a few communities of like-minded people that are questioning the status quo.
There are conventional notions about companies and business that can and should be questioned. These are a few I find most significant.
1. The purpose of companies is shareholder return.
Everyone knows “a company’s purpose is to make money and return that money to its shareholders.” I understand this is taught in MBA programs. It’s seductively simple. It lets founders, leaders, and managers off many hooks. It’s also a relatively modern notion, put forward in 1970 by economist Milton Friedman as a counter to the nascent idea of corporate social responsibility.
Companies aren’t churches, non-profits, social clubs, or governments. But this doesn’t mean they don’t, or can’t, play a hugely important role in society. They can also consider the interests and needs of more than their shareholders.
Managing a company to the benefit of multiple stakeholders, and not just to the metric of shareholder return, is a much harder job. But it’s also correspondingly a much more worthy and important goal.
2. Managers are mere agents of shareholders.
If the purpose of companies is shareholder return, then managers are the people that shareholders hire to work on their behalf. Friedman’s idea about company purpose came to be known as “agency theory” for this reason.
In a company run for the consideration of multiple stakeholders (shareholders, employees, vendors, partners, the community, and the earth), managers have a harder job. That perspective also encourages longer-term thinking, I believe. Such a company should ultimately benefit long-term shareholders.
3. Owning shares is the same as owning the company.
If you own a company, you can do anything you’d like with the assets, policies, and decisions of that company. If you own shares, you can do three things: vote, keep your shares, or sell them.
Lots of people own shares of large, publicly traded companies. Google’s shareholders can’t make decisions about Google’s products or policies. They probably can’t even walk into a Google facility without permission. They can’t hire or fire anyone. They aren’t owners, they are shareholders.
4. Business means leaving your humanity at home.
Don’t bring your whole self to work. Leave your problems at home. Don’t have friends at work. Don’t show weakness or vulnerability at work. Avoid discussing controversial topics. It’s fine to do work at home, but not to do home at work. Assume you’re in a zero-sum game. Respect the hierarchy. Treat people transactionally.
It’s no wonder the notion of “work/life balance” has skewed toward containing the toxicity to 40 hours and living life outside those hours.
The best description I’ve heard of a more humane alternative to the bleak description above is Bob Quinn’s notion of social excellence. We all know what great relationships and groups feel like — authentic dialog, embracing a higher purpose, co-creating, self-organizing, respect and connection, inspiration and healthy competition, fulfillment. We just usually leave those expectations at the door when we go to work in the morning. Social excellence is the idea that work can be like other great relationships in our lives.
5. People only get money from a job.
If work is only about trading hours of our life for money, not only are we selling ourselves short, but we’re walking away from finding fulfillment in approximately half of our adult waking hours. We’re making it much harder to live a fulfilled life.
Work can also be a source of fulfillment through social connection, respect, recognition, and affirmation. It can allow us to learn, grow, and develop mastery. Working with others toward a shared vision or even just a shared goal taps into a deep need and can be a great source of satisfaction and fulfillment. People get more from work than money.
6. Growth is the best goal.
If you’re not growing, you’re dying. The best metric of success is growth. Exponential growth without profitability is the most common venture-funded model. If you fail to grow, you’ve failed. Nearly all strategic plans include a growth target. Growth is good.
Alternately, you can see growth as a side effect of successfully managing the needs and interests of all your stakeholders. I’ve found growth to be one of those paradoxical goals that’s easier to hit when you’re aiming at other things. For example:
- Providing value to customers? Your profits will show it, and your shareholders will be happy.
- Happy, engaged employees are essential for growth.
- Supporting your community creates a better place to live, builds relationships you may need in the future, connects you with potential customers, and leads to employee referrals.
- Loyalty to and good treatment of your vendors not only makes a difference in the service and products you receive from them, but it pays off if the power dynamic ever shifts.
- Conserving and protecting the environment means your kids have a healthy place to live.
Growth is also a consequence of success that stresses your organization and becomes a challenge to be carefully managed. For us, growth is a side effect, not a goal.
7. Going public is the peak founder accomplishment.
This actually might be dated. But it did seem 20 years ago that the ultimate achievement of founding a company was to go public. Nowadays, the highest growth and most hyped companies seem to be the unicorns, most of which aren’t listed yet.
Privately held and family businesses have significant advantages today in our short-term, agency theory dominated environment. With longer time horizons, smaller shareholder bases, commitments to communities, fewer regulations, more privacy, and the flexibility to consider multiple stakeholders, these firms have real advantages over publicly traded firms. Of course, they also don’t have access to the public capital markets.
Maybe the new peak accomplishment for a founder should be successfully exiting their company in a way that sets it up for long-term success.
8. Break-through innovation is the only sort of innovation.
The eureka moment. New product development. Market disruption. “This changes everything…”
I’m usually glad I live in a country that leads the world this way. But it’s not the only way to innovate. It’s harder to see a company’s product/service/operations improve gradually and continuously over time. But those improvements are harder to rip off, and their value compounds over time.
9. People are just “resources.”
The language belies the belief. Not only is thinking about people like you think about machines, raw material, intellectual property, or capital disrespectful, but it’s a gross oversimplification that can lead managers astray and damage companies in the long-term.
People-first companies invest in their employees, are welcoming and inclusive, respect and accommodate the whole person, and work to make work fulfilling. They also become employers of choice (winning talent wars), receive the benefit of their employees’ creativity and dedication, and have happier customers.
10. Strategic planning is episodic, not continuous.
This one is probably my most recent learning. For a long time, I felt a nagging sense of inferiority and guilt for not regularly doing strategic planning and creating 3-, 5-, and 10-year plans. Somehow it just never happened and never seemed that important. But having absorbed the traditional notion of the importance of a strategic plan, I didn’t feel good about my slacking.
The breakthrough for me came when I understood that culture, purpose, and a set of evergreen business principles were more effective than episodic, discrete strategic planning. Our strategy had been strong and continuous all along. I just didn’t understand that.
An example of an evergreen strategic principle is our focus on being as good as we can be, in place of setting a growth goal. We call it: “great, not big.”
The culture/purpose/principles approach to strategy has the advantage that it lasts for much longer than any given strategic plan since it’s evergreen. You also save a bunch of time and money on consultants.
The evergreen approach doesn’t preclude setting goals. It just means that you approach the world in a consistent, deeply-held fashion and work to achieve goals aligned with your purpose, through your culture, by applying your principles.
11. Profit is suspect.
A depressing study found that people assume profit is a sign of bad behavior on a company’s part, rather than an indicator of delivering value to customers. (People Think Companies Can’t Do Good and Make Money. Can Companies Prove Them Wrong?)
The assumption that profits indicate a company acting against the interests of their stakeholders seems to me to also explain the widespread assumption that non-profit organizations are morally superior to companies.
Atomic’s purpose is to be a source of fulfillment for employees and a force for good for our clients and communities. By achieving our purpose, we do an awful lot of good. But we also make a profit because we create value for our clients.
Alternative Business Communities
I’ve found four organizations that feel like my “tribe.” I’ve been active in each of these communities for the last few years. We’ve intentionally expanded participation by other Atoms as well to give them perspective on our company and connect them with like-minded people and firms.
Tugboat Institute has approximately 180 member companies from all parts of the US and in many different industries. Founder Dave Whorton and his team espouse the Seven Ps — purpose-driven, people-first, privately held, profitable, pragmatic innovation, paced growth, and perseverance — as the common traits of evergreen companies.
Tugboat has an annual summit, visits to exemplar companies such as Radio Flyer and Edward Jones, and geographically organized peer groups. The events are extraordinarily well organized and curated. Their Evergreen Journal is a great, free resource.
Membership is limited to the top officer of a company. Approximately two-thirds of us are founders.
Small Giants Community
The Small Giants Community hails from a seminal book of the same name by author Bo Burlingham. Their recognition of the countries best small companies, done in conjunction with Forbes, happens at the annual Summit. Geographically organized peer groups, webinars, and leadership training are offerings of this vibrant and diverse community.
The Small Giants team does a fantastic job organizing and curating content. They also put on fun parties.
The Small Giants Summit is complementary to Tugboat and allows us to expose any Atom we’d like to these important ideas and like-minded people.
Center for Positive Organizations
Housed in the Ross School of Business at the University of Michigan, the Center for Positive Organizations brings together academics for research in Positive Organizational Scholarship. In addition to an annual conference, CPO has a Consortium of member companies with regular events.
While CPO is by far the most academic and research-oriented, it is research grounded in practice and reality. Their annual conference is very well-organized and attended. Membership in the Consortium give you access to their events and CPO researchers.
Local First was founded in Grand Rapids, Michigan, and represents my local choice for community, programming, and events. While I’m sure not every city is lucky enough to have something like it, there other similar organizations around the country.
Local First has been an effective champion of B Corp certification and is expanding its operations under the Good For Michigan brand.
- Certified B Corporations is a community of companies certified as benefit corporations, which is to say a “global community of people using businesses as a force for good.”
- Conscious Capitalism is an organization I’m not very familiar with but quite intrigued by. Their credo includes this wonderful statement:
“We believe that business is good because it creates value, it is ethical because it is based on voluntary exchange, it is noble because it can elevate our existence and it is heroic because it lifts people out of poverty and creates prosperity.”
- The National Center for Employee Ownership is the most specialized of the communities I’ve listed. It’s the go-to place for, as you might guess, all forms of employee ownership.
- Software Product Development in a Time of Pandemic - March 16, 2020
- Eleven unquestioned assumptions of business – and why they’re wrong - March 3, 2020
- A framework to define and describe organizational culture - January 21, 2020
- Atomic Ownership, Part 6: Lessons Learned - November 26, 2019
- Atomic Ownership, Part 5: Distributions - May 1, 2019