Doing Well by Doing Good

(This article was published in both national and world MENSA)

DOING WELL BY DOING GOOD

The American business community has, at best, a tenuous grasp on the indisputable principle that honorable conduct is a prerequisite for ongoing abundant profit. Benjamin Franklin understood the benefits of enlightened and ethical business practices when he advised “Do well by doing good.” Throughout the history of capitalism, many entrepreneurs have prospered through application of this principle.

Harvard Business School historian Nancy Koehn makes the point that earlier entrepreneurs were driven by their own personal philosophy that doing “good” for their customers, employees and the community as a whole means that their business will do very well. Koehn gives several examples of enlightened business practices. Many thinkers from the first two hundred years of American history have commented on the principle of high minded businesses. For example, “Doing well is the result of doing good. That’s what capitalism is all about.” – Ralph Waldo Emerson.

However, it wasn’t until the 1960s that modern management science curriculum began to teach students that they can create stable wealth by doing “good.” At last a fundamental truth that guides the creation of sustainable wealth was available to business students.

Today there is excellent data, both qualitative and quantitative, showing that a company’s successful relationships with people, as well as ethical business practices, are positively related to its financial performance.

Four scholars, from divergent fields, deserve the credit for developing the established modern principles that produce optimal wealth.

Abraham Maslow studied what motivated people and is particularly remembered for his hierarchy of needs theory. (Remember the pyramid with food, water and shelter on the bottom and self-actualization on top?) Knowing what made people tick helped Maslow become a business management guru throughout the ’50s and ’60s trusted by the largest of corporations and considered today the father of modern management.

In his 1965 book Maslow on Management (originally Eupsychian Management) he writes, “The good society is one in which virtue pays.” In other words, prosperity is the natural consequence of “doing good.”

Douglas McGregor, a contemporary of Maslow’s, also known for his insights on the intersection of human motivation and management, was a professor at the MIT Sloan School of Management. He developed the contrasting X and Y theories of human motivation. Theory X stresses the importance of strict supervision, external rewards and penalties; it’s all about control by management. In contrast, Theory Y has a profoundly more profitable influence in the motivating role of job satisfaction by encouraging workers to approach tasks motivated by personal satisfaction and pride in performing competently without direct supervision.

McGregor’s book The Human Side of Enterprise (1960) had a significant influence on the relationship between management and employees. He pointed out, “The ingenuity of the average worker is sufficient to outwit any system of controls devised by management.” Like all natural systems, human behavior cannot be controlled; however it can be managed. “Any attempt by management to enforce behavior that is contrary to human nature is preordained to fail.” Conversely, management methods that complement human nature are sure to provide wealth and wellbeing for all concerned.

Peter Drucker, also considered one of the foremost pioneers in developing management education, training and techniques, published 39 books on the subjects that were translated into 30 languages.

For years Drucker offered Wall Street Journal readers insights on management. On his passing, one of the many look-back pieces the paper published about him was headlined, “Peter Drucker’s Legacy Includes Simple Advice: It’s all About the People.” He was “among the first to see the limits of large industrial organizations and their authoritarian hierarchies” and understood the importance of workers “motivated by personal pride as much as by fear and a paycheck.”

John Nash, as recounted in the hit movie A Beautiful Mind, brainstormed the beginnings of his Nobel Prize-winning Nash equilibrium theory while at a bar. He and his buddies were evaluating their romantic prospects with ladies at the establishment when the four friends began to compete for the beautiful blonde in a group of five women. “If we all go for the blonde,” Nash says, “we block each other; not a single one of us is going to get her […] and we insult the other girls. But, what if no one goes for the blonde? We don’t get in each other’s way, and we don’t insult the other girls. It’s the only way to win. […] The best result comes from everyone in the room doing what’s best for himself and for the group.”

The two most important conclusions gleaned from John Nash’s equations are (1) more profit is created through cooperation than through competition. And (2) nice guys finish first.

One can hardly complete a college-level business course without exploring the differences between the X Theory and Y Theory of management or climbing Maslow’s ladder of human needs from staying alive to becoming fulfilled. These classes, however, do not provide adequate familiarization with modern management science, nor do they really explain Maslow in relationship to management. Most courses fail to adequately convey the idea that profits are maximized when respect for the human side of enterprise is emphasized. Or if those notions are imparted, students approach them the same way I did with algebra: I did whatever math was necessary to graduate and have never worked another algebra problem for the rest of my life. Likewise, these principles of “doing good” in business rarely make it beyond the classroom. Because of intellectual competition and academic hubris, the contributions of the leaders of modern marketing and management science are rarely available in a single source, no matter what college you attend.

Nevertheless, a small group of today’s upper-echelon management professionals are applying Eupsychian management principles. For instance General Motors and Ford recently announced they are cooperating in the manufacture of high performance sport cars that will have the same transmissions installed rather than separately designed and manufactured parts. Maslow and company would be pleased! encourages .

I hope this helps remind business people of their college days, and them to use proven profit enhancement principles based on “good guys finish first