HR’s moral mission

HR’s moral mission

In 2004, in my book Spiritual Capital, I wrote: “Our capitalist culture and the business practices that operate within it are in crisis. Capitalism as we know it today—an amoral culture of short-term self-interest, profit maximisation, emphasis on shareholder value, isolationist thinking, and profligate disregard for long-term consequences—is unsustainable. It is a monster set to consume itself.”

I did not expect my prophesy to come true so quickly, but our current financial and economic meltdown demonstrates its truth. Capitalism is, indeed, in crisis, and the monster has destroyed itself. But the question facing all the world’s leaders is: what can replace it? The answer depends not just on the soundness of our economic system and future business success, but on the sustainability of advanced human culture itself.

Pure capitalism rests upon two basic principles: the sanctity of free markets for setting the value and exchange of goods in society, and the right to private ownership generating profit. It makes two critical assumptions about human nature: that human beings are primarily economic beings, “meant to truck, barter, and trade,” and that we are primarily selfish, always certain to pursue our own self-interest. But even Adam Smith, who first outlined these principles, found them inadequate. In his concern for the poor, and for the shepherding of institutions dealing with health, education, and infrastructure, Smith believed there must be a healthy, balancing public sector. He also emphasised the importance of thriving community structures, regulatory institutions, and the role that values must play in our lives. Those who use his name, and selected portions of his writings, to justify the kind of profligate greed and irresponsible risk-taking that have led to the present crisis ignore this aspect of his work.

The dangers latent in pure, unbridled capitalism were addressed by both Keynesian economics and socialism. Socialism simply failed, but in response to today’s crisis we are seeing a revival of Keynesian economics. This, too, is inadequate. It places insufficient emphasis on the need for values-driven economic practice, and it ignores human psychology. Keynes did not see the great role that fear and pessimism can play in times of economic downturn. These are all too evident now as financial institutions swallow up huge stimulus initiatives being taken by national governments and yet remain too fearful and unconfident to resume lending. There is a lack of trust in the markets and in other financial institutions that prevents the simple scenario of “repair and continue” in which so many business people would like to believe. Nor will the mere imposition of tighter regulations solve the problem.

There is something fundamentally wrong with an economic system dominated by greed and self-interest, and it needs replacing along the lines of moral capitalism a term coined by French president Nicholas Sarkozy when calling on Europe to lead the way in restructuring the global financial system. Whether Sarkozy’s emphasis on wider values, or Adam Smith’s claim that the values of “humanity, justice, generosity, and public spirit are of most use” can be contained within a system that we still call capitalism is an open question. Smith himself had his reservations, as do many Nobel economists today.

Business has been driven primarily by the negative motivations of greed and self-interest, causing the public to respond with the further negative motivations of fear and anger. Nothing good can ever come from negative motivations. Instead, business must begin to act from the higher motivations of cooperation, creativity and service. Business must come to see itself as the servant and the protector of the people, the communities and the earth from which it derives its resources and its wealth. This is where the role of HR departments becomes so fundamental.

HR departments have always been the pure relation inside the business culture; their training programs, social initiatives and people protection schemes are always the first to be forsaken in times of economic downturn. They must redefine themselves and their role, leading the way in raising the motivations that drive business culture. HR departments are in fact the public sector within the private sector. They are the conscience of the CEO, and themselves bear the responsibility to raise the whole game that business plays. They can fulfil this moral mission by surfacing the destructive assumptions and motivations that have driven business into the present crisis, and by instilling healthier ones that can get us out. This can be achieved by following five basic principles:

Instilling a sense of Holism
Educating the CEO and other senior leaders to see that the business is not an island unto itself and that they cannot afford to ignore what is outside. What business does affects us all, and if driven only by greed and self-interest it damages not only its own people, the wider community, and the environment, but it undermines itself. This damages the bottom line. Unilever Asia’s commitment to improving local communities and Coca Cola’s commitment to building health clinics in rural China exemplify a recognition of this.

Reframing
Questioning the sacred cow of shareholder value and emphasising instead value to customers, suppliers, and employees. British retailer John Lewis dedicates itself to these, and is one of the few UK companies making a profit in the current crisis. Replacing the goal of open-ended profit with the notion of a decent profit. Two companies to embrace the principle of fair trade are international fruit and vegetable distributor Chiquita Banana and Starbucks.

Being Vision and Value Led
Defining business as the wealth creator of wider society and accepting that corporate taxes are a patriotic opportunity, not something to be avoided. Articulating company values that support a sense of mission and higher service. Living our values adds meaning to our lives and work. This boosts morale, creativity, and productivity.

Having a Sense of Vocation
Replacing arrogance with humility and encouraging business to join the higher professions in serving society, the environment, and future generations. Redefining the concept of CSR, as in BP’s ‘Beyond Petroleum’. The higher purpose of HR is expressed eloquently by Aristotle: “It is clear that in matters of the economy, people are of greater significance than material property—and their quality of greater concern than that of the goods making up their wealth.” In fulfilling its moral mission, HR’s role in people management can encompass people enrichment. A company that enriches its people enriches itself and its community. The result shows, inevitably, in a healthy bottom line.

Making Positive Use of Adversity
In the words of Nobel economist Amartya Sen, seeing in crisis “an opportunity to address long-term problems where people are willing to reconsider established conventions”. British food retailer Sainsbury’s is thriving during the crisis by introducing a low-cost food line that preserves quality while giving customers better value.

(This article first appeared in HR Monthly, June 2009.)