Playing To Win
Striving to Follow the Golden Rule
The Only Route to Sustainable Strategy
In the business world these days, corporate purpose, social responsibility, and ethics are pressing topics. I have been watching, thinking, and writing about this nexus of subjects for twenty years, and have come to believe that a very ancient concept, the Golden Rule, can play a helpful role in guiding business decision-making on this front. For that reason, I have dedicated my second Year III Playing to Win/Practitioner Insights piece to Striving to Follow the Golden Rule: The Only Route to Sustainable Strategy. You can find the previous 112 PTW/PI here.
The Golden Rule
The Golden Rule is a remarkably consistent feature of societies across the world. Its most common phrasing derives from Christian annals — the second commandment of Jesus during the Sermon on the Mount: “Do unto others as you would have them do unto you.” But extremely close analogs are found in all the world’s major religions — Islam, Hinduism, Buddhism, Sikhism, Judaism. When I see a belief that is held so uniformly across the cultural, racial, and religious divides of humanity, I tend to take it seriously, making the assumption that if it didn’t make much sense, it wouldn’t maintain its (what I might term) dominant market share across all segments.
A Great Check for Strategy
Since all humans are imperfect, none of us, no matter how hard we strive, will be capable of following the Golden Rule without fail. However, the striving part is important. If we don’t even try, e.g., we bully co-workers or treat wait-staff like dirt, we will end up breaking it on a daily basis and thereby diminishing rather than enhancing the civility of the world.
Over time, I have come to believe that for companies, the Golden Rule is a great check on the sustainability of their strategies. I would argue that if your core business model intentionally violates the Golden Rule, in due course, it will bring down your strategy. What would be an example of a business model that intentionally violates the Golden Rule? I know a company that gives its financial organization the target of stretching its payables such that their aging is 30 days greater than that of its receivables. If the shoe was on the other foot, would it want to be in the position of its suppliers and customers? In this case, tautologically, no. It wouldn’t do what it currently doing if it would have been happy with receivables 30 days older than payables.
Currently, the company in question is big enough and powerful enough to enforce its goal. But I believe that its strategy is less sustainable because it breaks the Golden Rule. Over time, its suppliers and customers will expend their energy on the company’s competitors who adhere more to the Golden Rule. That will weaken the company — not tomorrow or even this year. But it will.
For this reason, I believe it is good discipline to ask whether your strategy is premised upon the Golden Rule with respect to at least three major groups: your customers, your employees, and the community in which you operate. (You could similarly add suppliers, shareholders or partners as well, but the point is sufficiently illustrated with these three).
The Customer Check
Here the question to ask is the extent to which you would you want to be treated as you treat your customers?
- Do you tell them that search results are based on popularity, but they are in fact secretly based on what is most convenient/profitable/pleasing you?
- Do you sell their information to third parties without telling them?
- Do you force them to buy things they really don’t want to be allowed to buy the things they really want?
- Do you financially punish them if they buy some of their purchases from a competitor?
- Do you perform A/B testing on them without informing them that they are part of a social science experiment?
- Do you give them available discounts only if they ask for them?
- Do you let them leave excessive funds in non-interest-bearing accounts when they could be earning more if you helped them better manage?
- Do you sell customers your offering only by purposely instilling fear, uncertainty, and doubt (FUD) in their minds?
Of course, we can all immediately name companies that prominently engage in the above practices that they would hate if applied, instead, to them. And in every case, the Golden Rule-violating practice causes the strategy to be less sustainable. In some of the cases, like bundled selling and FUD, customers simply find an alternative and never return. In others, like fraudulent search results, and selling information without permission, the regulators have ridden to the rescue of customers to protect them against such practices. Major players such as Google have been fined repeatedly for Golden Rule-violating practices. Even other suppliers have stepped in to limit such practices, as with Apple disabling Facebook’s ability to secretly track and monetize customer behavior.
While some (or all) of the practices could be characterized as issues that companies should have avoided based on their ethical policies, I think it is easier to avoid such lapses by simply auditing one’s customer practices based on degree of adherence to the Golden Rule. If you wouldn’t want to have done to you what you are doing to customers, it is probably unethical and is certainly bad for the sustainability of your strategy. You might think you are powerful enough to impose this asymmetry on customers, but I would argue that history is littered with once-powerful companies whose strategies were eroded if not destroyed by either customers or regulators figuring out ways to take countervailing action.
The Employee Check
Here the question to ask is the extent to which you would you want to be treated as you treat your employees?
- Do you ask them for loyalty and but, when convenient for you, fire them you as is your right because they are employed under the ‘at will work’ construct?
- Do you inform them of the shifts that they must work (or be fired) only a week before the day of the shift (as is the case for many retailers)?
- Do you fail to provide them with a combination of number of weekly hours and hourly wages that enables them to live above the poverty line?
- Do you crush attempts by workers to gain some modicum of bargaining power against their large employer (you) by unionizing?
Again, these are routine behaviors — and are routine because companies are powerful enough to impose the resultant environment on their employees. But they impinge upon the sustainability of their own strategies by violating the Golden Rule in these ways. MIT professor Zeynep Ton powerfully makes this case in her book The Good Jobs Strategy and the forthcoming The Case for Good Jobs. Costco continues to prosper based on strict following of the Golden Rule with respect to employees (and customers for that matter) while Walmart, to its credit, figured out that it needed to do an about-face on a number of its employee practices to have a chance of delivering the customer service that it targets.
The Community Check
Here the question to ask is the extent to which you would you want to be treated as you treat your community? This is a somewhat trickier question in that it is not entirely obvious who should be included in the definition of your community. It is easy to define who is or is not a customer or employee. But I would argue that for business, the ‘others’ referred to in the Golden Rule, include the physical environment of the community, institutions supported by the community, and the finances of the community. The questions would include:
- Do you pollute the environment of the community in which you operate?
- Do you benefit from the educational infrastructure of the community (e.g., universities and community colleges) but do not contribute back in any way?
- Do you attempt to avoid taxes imposed by the community to fund the institutions that make the community an attractive place for you to locate your operations?
- Do you obey the letter of community laws, but not their spirit?
The mental exercise is to put yourself in the position of the community and simply ask: how would I feel about being on the receiving end? How would I feel if I was the local university and your company depended on our graduates for a large proportion of your specialized-skill hires, but you never did anything to support the university — e.g., never donated, never offered to teach classes, never supported efforts to expand, etc.
Strategy Sustainability
If your strategy involves striving to adhere to the Golden Rule with respect to customers, employees, and community, those actors (and their supporters/protectors such as regulators and NGOs) will have the incentive to contribute to the success of your strategy. Customers will see you as fair and trustworthy — and won’t feel compelled to find an alternative. Employees will value their relationship with you and work to contribute to your success (in part because your success contributes to their own well-being as an employee). The community will look for ways to support your success because you are a valued member of the community. Nobody will be appealing to the regulators to attempt to rein in your power or restrict your activities.
But if your strategy clearly and explicitly involves ignoring the Golden Rule, these actors will all work to undermine your strategy. Customers will actively seek out alternatives. They will switch from utilizing their PC to their smart phone to get away from your operating system. They will pull money out of your checking account and give it to a mutual fund company. They will scream loud enough to get regulators to stop your untrammeled ability to violate their privacy, or at least fine the hell out of you for doing so.
Employees will leave you as soon as they can find another job, sending your turnover rates through the roof. And while they are there, they will work-to-rule, exhibiting the shockingly low engagement rates that Gallup tracks with its employee surveys. And communities will do as little as they can to make you feel comfortable operating in their jurisdiction, or regulate you out of them, as many communities do with fast food outlets.
All of these efforts impose punishing headwinds against the strategy of companies who have no aspiration to follow the Golden Rule, but rather show explicit intent to violate it. Their strategies will prove to be less sustainable than the strategies of companies like Costco and Four Seasons Hotels & Resorts who hold the Golden Rule near and dear to the heart of their strategies.
Practitioner Insights
It can be daunting to think through, at a high and abstract level, how to be an ethical or socially responsible company. For me, it is far easier to tackle the issue by taking it down to a concrete micro level and simply asking yourself, every time you are contemplating any decision about customers, employees, or community: am I striving to follow the Golden Rule? If the answer is consistently affirmative, you will be designing a more sustainable strategy. Remember strategy is choice and the cumulation of all the choices that you make is your strategy. And if those choices are made in keeping with the Golden Rule, your customers, employees, and community will lean in to support your strategy, enhancing its sustainability.
