MFK: Your book lays out six new rules of business that replace old rules—old ways of thinking about business. The old rule for instance, “Shareholder value of profit maximization is the organizing principle of the corporation,” is replaced by “Businesses serve many objectives beyond shareholder value.”
I want to bring up one of these rules specifically. Where the old assumption would be, “Labor is a cost to be minimized,” you say the new rule is “Employees give voice to risk and competitive advantage.” That’s a really interesting point and an interesting way of putting it. Can you talk about that?
JS: You think about the remarkable companies that really have excelled because they put employees at the center. You know, customer serving enterprises. Southwest comes to mind—the business that Herb Kelleher built and how clear he was about the importance of the employee. Costco would be another one. I write about Herman Miller. You know, design was their thing, but that meant they need to honor the designer, and then ultimately the emphasis that they put on their employees as innovators is what enabled Herman Miller to jump ahead and kind of identify design and sustainability as intertwined ideas, ahead of their competitors and other industries.
It’s not that people didn’t always want to be able to harmonize what they thought at home and what they thought at work. But the current generation and its digital natives, and their ability to deploy social media to very interesting ends, is a massive factor of change in this moment. If you think about Me Too, for instance, or the Google walkout, or Amazon saying it’s behind a federal minimum wage of $15 an hour. Those are game-changing moments, with employees at the center. This recent decision of so many companies to put the pause button on their political spending, is a very recent one. So, we’re seeing a lot of change. I think basically it’s good news in the sense that perhaps we can figure out what governance looks like if we’re actually listening well to the employee voice. It’s an incredible source of competitive advantage for companies that kind of lean in on this, rather than let it happen around all you.
MFK: What’s the rule where you see the most friction, where maybe the majority of organizations you’ve looked at struggle more with the old versus the new?
JS: Well, I’d take us to the last rule around co-creation. When the system itself is at risk, whether it's fisheries or coral reefs, inequality or the national conversation we're having in the US over racism—you just don’t address it one company at a time. It requires collaboration. And if we need an example of the potential of collaboration let’s look at this remarkable pace with which countries have developed vaccines. That didn't happen without some collaboration that I think we’ll learn more about when we get to see the movie version of COVID. Collaboration not just between and among private entities, but also with the government.
What are the skills we actually need to collaborate well, and do that without killing competition? Competition continues to be, obviously, a force of innovation and change. But somehow getting the balance right in that seems to me to make a lot of sense.
MFK: Yes, it’s something that we’re definitely picking up in the climate change narrative, where there’s been a lot of emphasis on risk and risk mitigation. Now you’re starting to see more communication and comfort with the idea of opportunity, and how do we kind of shift into messages of opportunity around all of this adaptation that will be required.
How do you feel about the role of regulation as a driver of change? And maybe as part of that, are there other things that you are seeing that give you hope?
JS: I don’t know that I could talk generally about regulation. Living in the United States, it's just been such a crazy period of time. You can’t get anything done in the legislature and so you do it by executive order. Then the next administration comes in and rolls back all the regulations that the last one put in, or re-regulates some things that they had deregulated.
I believe the real agency is inside companies. The general noise we’re hearing from investors is a contributor to change. It’s a voice that we're hearing more clearly. But I’m interested in metrics. Metrics for companies and metrics that help you diagnose and analyze what’s going on. That is not usually what investors are looking for.
They want simplicity. They want things that are easy to compare between and among companies so that they can make simple comparisons and decide who’s in and out. I don’t think that gets us very far. I think that’s amplifying the voice of the investor over those who actually have the real motivation to manage differently. What are we trying to do and what are the metrics that help us understand if we’re making progress? That’s where metrics like employee engagement scores and retention scores make sense.
There’s a lot of things that help us understand whether or not we’re making progress. I don't think any of them are particularly easy to make comparisons between and among. Maybe carbon is one, with the goal of a net zero gain. That might be a profound exception. But that’s a piece that I've been wrestling with.