When behaving ethically is a competitive advantage
Dov Seidman, the CEO of LRN, dropped by earlier this week. He's visited before, and I haven't known what to make of what he's selling. LRN started out in 1992 as a legal research network (LRN, get it?) that law firms could outsource projects to, then got into compliance training for corporations, and now is all about training aimed at "inspiring principled performance."
Yeah, whatever--I generally prefer to leave high-minded stuff like that to my colleague Marc Gunther. But the continuing stream of alarming news out of Hewlett-Packard has started to make some of the things Seidman says ring true. If you focus on compliance with rules, he argues, you inevitably get the kind of behavior seen at HP, where the discussion about spying on board members seemed to focus entirely on what might be legal rather than what was right. The only way to prevent such missteps, Seidman says, is to have a corporate culture in which such shenanigans are frowned upon. The funny thing is, HP used to be famous for having such a strong culture. Companies with the founders still around usually do. "Then," says Seidman, "they get lazy and start writing these dumb rules." Seidman says culture can be a major competitive advantage for companies. Sounds reasonable. He also thinks it can be inculcated, not just developed organically. We'll see about that. UPDATE: In the comments section below, FORTUNE's Marc Gunther has a nice post about how good employees want to work for companies with good values. Again, I'm always dubious of corporate talk about "values" and "culture" because so often it's just talk. But I absolutely agree that most people want to feel that their work has a purpose, and companies can gain an advantage by giving them that feeling. High-minded, huh? I'll take that as a compliment...I think.
I don't believe it's possible to prove that companies with strong moral values outperform their peers, if only because it's hard to identify which companies have such values. I would have put H-P in that category, until now. But it seems clear that the opposite is true, and the evidence there is, unhappily, abundant. Enron, Worldcom, Adelphia, to begin with. More recently, Cablevision and the 100 or so companies caught up in the scandal over backdating stock options. It's a depressingly long list. On the other hand-it stands to reason that the best employees want to work for a company with good values. Here's how Jeff Immelt put it to me in a 2004 interview: "The reason people come to work for GE is that they want to be about something that is bigger than themselves. People want to work hard, they want to get promoted, they want stock options. But they also want to work for a company that makes a difference, a company that's doing great things in the world." GE's Eco-Imagination iniatives give people a reason to come to work every day. (No one I know gets up in the morning and goes to the office "to enhance shareholder value.") Customers and communities, too, would prefer to do business with companies they admire, and those they trust. I think this helps explains the changes underway at Wal-Mart. So despite the headlines, I think there's reason to be encouraged about where corporate America is headed. Business, as well as life, is simpler if you hold to strong values. You just don't have to remember the various lies that you've told. Instead, you focus on business. There is your competitive advantage.
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