How a culture of altruism benefits the bottom line

February 2017 | EXPERT BRIEFING | LITIGATION & DISPUTE RESOLUTION

financierworldwide.com

In every culture, including corporate culture, there is conflict created in both the ‘quid pro quo’ profit motive and the losses inevitably resulting from the problem known as ‘the tragedy of the commons’. The secret to success lies in responding to the conflicts arising from these two issues through an understanding of altruism and restorative practices, as an expression of altruism, to create a sustainable internal and external company culture which generates value through: (i) profitable bottom lines on the operating statement; and (ii) increased goodwill on the balance sheet. Care and compassion are not separate from being professional or doing the work of the organisation, but are a natural and living representation of people’s humanity in the workplace.

Quid pro quo literally means ‘this for that’ and it is the standard understanding of what it means to succeed in business. The company understands that it exchanges its product or service for money. There must be revenue from sales or services and those revenues must exceed expenses.

Tragedy of the commons is the term used to describe the shrinkage or losses that comes when there are shared assets or benefits. The term derives from villages in England where there was shared pasture for grazing, ‘the commons,’ and the tragedy occurs because one or more members of the community let their livestock overgraze, damaging the commons and the mutual benefit to everyone. This concept is used to understand all sorts of phenomena in our business lives, ranging from explaining the disappearance of all the spoons in the coffee break room, to the failure of corporate productivity when corporate representatives require kickbacks or thwart the sale, or the failure of community services when government officials require bribes or refuse to perform their duty.

Everyone wants to receive value in exchange for their service, but the reality is that the focus on the quid pro quo is illusory. One can say that their barrel of oil is worth $40 dollars today, the commodities exchange may even say so, but at that very moment there is someone paying $38 for a barrel while someone else may be paying $45. In each case, whether $38, $40 or $45, the price may be the ‘right’ price for the buyer and seller.

What gets missed when a company focuses entirely on the quid pro quo is the commons component, which is the value inherent in all of the relationships of the company. This means recognising that value is created for the company, both by quid pro quo transactions and the shared benefits that create a commons in that same relationship. This dualistic nature applies to all of the following: (i) relationships between shareholders, the board and the officers; (ii) relationships of the officers, managers and employees; and (iii) relationships of the company with its markets and other external constituencies. In all of these relationships there are quid pro quos and there are commons.

The quid pro quo with the shareholders is harmed when the board and the officers do not return value on the investment of the shareholder or the work of the officers. The quid pro quo with the employees is harmed when employees are squeezed by sharp practices. The quid pro quo with customers is diminished as the company starts diluting or diminishing its quality product. The quid pro quo with the company’s local community is harmed when the company cheats on its property taxes or illegally dumps its waste.

The commons with the shareholders is harmed when they are not fully informed of the company’s successes and failures. Out of distrust, the shareholders take action to shake up the board and officers, and look good on paper, but now the company must find a way to restore that something that was lost. What was lost is that common benefit that encourages each party to put into the company that something extra that made things ‘work’.

Altruism is the practice that creates added value in both the quid pro quo and commons relationships of the company. When it comes to quid pro quo, boards and officers may dread shareholders who know too much, but a company may find it can thrive in ways it had not anticipated when it candidly shares its successes and failures with the shareholders. Altruism may increase the loyalty of the shareholders and their willingness to invest further when they see a board and the officers willing to take less on their bonuses so that earnings can be retained to achieve a particular goal. Altruism may increase the company’s ability to control its costs when the price of materials increase and employees join in taking less when they see officers and managers taking less. Altruism may save the company a customer when the company waives a penalty under a contract, not because it has to, but because it genuinely cares about the customer and the customer knows it. Authenticity in relationships only strengthens it.

In the commons relationships, the board member cares about issues facing a particular shareholder, the officer cares about a board member or employee, the manager helps the employee, the employee helps a customer and by so doing, they are investing in the goodwill asset of the company. Altruism is not merely public relations or marketing. It is a fundamental aspect of the wiring in every human being. All manner of research is demonstrating the medicinal properties and effects on individuals to participate in the giving of their time and resources without expecting something back. Research shows the same result with respect to group dynamics and the positive impact on a group when altruism is included in its functions. Societies, including the miracle of the US economy itself, prosper when altruism is encouraged. A key, but seldom recognised engine of national economies is philanthropy.

Globalisation embodies the notion that economic value of a manufacturer’s product or an employee’s time is devalued by what can be made or the time that can be bought somewhere else in the world. While the foregoing may be an economic truth, it misses the point of the human reality. The human reality is that relationships between real people are disrupted. The business community is buying into the myth that money is the only factor that needs to be evaluated when making decisions about a company’s product or service, its market and its people that make it all work. The business community makes such assumptions at its peril. Every company, whether large and engaged in mass marketing, or small and engaged in niche marketing, has learned that its success depends on creating a ‘tribe’, a term for the notion that every product and service is best understood as an invitation to belong to a group, a group which provides identity and, therefore, meaning to the individual.

Restorative mediation is the concept of bringing an appreciation and acceptance of the human element and aspect of suffering, pain, conflict and confusion in interpersonal workplace relationships that inevitably arise in the quid pro quo transactions of the workplace. It is a powerful prescription for healing, externally and internally. The company that is willing to have its shareholders, directors, officers, managers, employees and customers know and comprehend the complexities of human nature is the company that can not only build a tribe, but can sustain its relationship with its tribe. Whether called shareholder relations, employee relations, customer relations or public relations, at the heart of all of it lies the ever present reality that there will be conflict and, ultimately, the company will be judged on how well it resolves conflict with its tribe. The question for the company is this: will it simply take a quid pro quo (transactional) approach to understanding the challenges it faces or will it choose to look past the transaction and invest the time and energy needed to restore the relationship between the company and its tribe member? This choice requires a company to make the decision of whether it is concerned with the short term or the long term. Is this business one where it will develop the brand name with a quality product and then, just before saturation, dilute the product, make a big profit, sell the company and let the next owners salvage the brand to do the same thing? Or, is this company one that can say with certainty that, regardless of the changes in technology or economics, it and its tribe can work together to create a meaningful and economically beneficial relationship which sustains both the company and the tribe for years to come? Exploitation of the commons in the short term diminishes opportunities for others and the mutual gain collaboration offers to those willing to appreciate and practice altruism.

Richard Pershing is a director and Tony Belak is a health care program and associate center director at the Center for Conflict Resolution at the Tom and Vi Zapara School of Business at La Sierra University, Riverside, California. Mr Pershing can be contacted on +1 (951) 533 6625 or by email: rwp@rjslaw.com. Mr Belak can be contacted on+1 (502) 345 6763 or by email: anthony.belak@louisville.edu.

Richard Pershing and Tony Belak

Center for Conflict Resolution