Do great businesses still pursue Milton Friedman’s maxim that “a business’s sole purpose is to generate profit for shareholders?” Professor Kanter argues in this article that they don’t. Instead, she claims that great companies “believe that business is an intrinsic part of society” and are “vehicles for accomplishing societal purposes and for providing meaningful livelihoods for those who work in them”—a belief she calls institutional logic. In this article, Kanter argues that great companies have been embracing institutional logic for some time and suggests that it be given credibility alongside existing economic or financial logic within both strategic and ongoing business activities. She goes on to outline six ways that great companies adhere to this logic, which include a common purpose, long-term view, emotional engagement, community building, innovation, and self organization.
Though Kanter could strengthen her argument by providing further data to support some of her claims, her arguments still present an intriguing challenge against the assumption that companies must eventually forego other concerns, social or otherwise, in order to achieve greater financial performance. On a separate note, this article also provides an interesting timeline beginning in the nineteenth century that illustrates American society’s changing views on what makes a company good.
If great companies are in fact following the institutional logic that Kanter proposes, why do you think other companies maintain their primary focus on financial returns?
Source: Harvard Business ReviewView This Resource