According to an article written by Rosabeth Moss Kanter and published in the Harvard Business Review (November 2011), great companies think differently. “Companies’ claims that they serve society gain credence when they allocate resources to community projects without seeking immediate returns” (p. 74). The author describes the concept of institutional logic as the beliefs that companies are not just money makers, but are vehicles for providing meaningful lives for the employees and for providing opportunities to make society better. The author describes six ways great companies serve the communities they are located in.
First, Kanter states that great companies have a Common Purpose. “Conceiving of the firm as a social institution serves as a buffer against uncertainty and change by providing corporations with a coherent identity” (p. 69). Having a common purpose can compensate for the uncertainty in a global business economy these days. Leaders who can provide institutional grounding through service that affirms the purpose and values of the company will survive and prosper in the ever changing world of business.
A Long Term Focus is the second key for great companies to serve their communities. Kanter states, “thinking of the firm as a social institution generates a long-term perspective that can justify any short-term financial sacrifices required to achieve the corporate purpose and to endure over time” (p. 71). The company’s values guide decisions to invest in the human side of the organization for the benefit of society.
In addition, Kanter describes Emotional Engagement as an important key to institutional logic. The author states, “the transmission of institutional values can evoke positive emotions, stimulate motivation, and propel self-regulation or peer regulation” (p.71). Moods and emotions are contagious and can affect issues such as work performance, absenteeism, employee turnover rate, and health. People influence one another and can affect performance in others. Companies where emotional engagement is apparent, employees who believe their work is emotionally compelling and meaningful will produce more.
Partnering with the Public is another key described by the author. “The need to cross borders and sectors to tap new business opportunities must be accompanied by concern for public issues beyond the boundaries of the firm, requiring the formation of public-private partnerships in which executives consider societal interests along with their business interests” (Kanter, 2011; p. 73). The need is growing for public and private partnerships in order to address needs in our communities.
“Articulating a purpose broader than making money can guide strategies and actions, open new sources for innovation, and help people express corporate and personal values in their everyday work” (Kanter, 2011; p. 75). Creating opportunities for individuals to use corporate resources for community projects will help to serve society goals. These types of interactions relay corporate values and produce opportunities for learning. Innovation can be found through the articulation of a broad purpose that includes serving others.
Finally, Kanter (2011) describes Self-Organization as a key topic for organizations serving their communities. “Great companies assume they can trust people and can rely on relationships, not just rules and structures. They are more likely to treat employees as self-determining professionals who coordinate and integrate activities by self-organizing and generating new ideas” (p. 75). Companies that use institutional logic understand that people are not working simply for a pay check. Today’s employees want to know that their work matters for more than just money. Workers want to know that what they are doing is impacting others in a transformative way. Leaders in these organizations understand that formal structures can be too rigid to allow for the free flow of ideas. Jobs are more engaging when employees are allowed to make choices concerning work related issues.
Leaders of today will produce much more effective companies and communities when working with the ideas presented here. It is up to each of us to serve our communities as well as our companies.