Lessons from India: social profitability

2010

I often meet people keen to go to India to teach them about business, leadership, and faith. But India has as many lessons to give as receive.

Take for example, the long time commitment from Indian businesses to serve others while also being financially profitable. While corporate social responsibility creative capitalism, and the triple bottom line are relatively new, trendy ideas in the West, many Indian businesses have long measured their success by how they care for their most important asset - their people.

A recent study among the 100 leading businesses in India found that social mission trumped shareholder value for every executive surveyed - a result that would be unthinkable among their American counterparts.

For example, ITC, a leading multi-business conglomerate involved in the study said, "Envisioning a larger societal purpose has always been a hallmark of ITC. The company sees no conflict between the twin goals of shareholder value enhancement and societal value creation."

This sounds nice on paper but what's it look like in reality? Well, two-thirds of the profits of the mammoth Tata Group companies go back into society through charitable foundations. Another conglomerate, the Godrej Group, builds schools, medical clinics and housing for its employees.

There are important debates about whether it's really the company's right to use profits this way or whether shareholders should simply be paid their dividends and allowed to personally decide how to use their profits to make the world a better place (an argument largely rooted in an individualist versus a collectivist perspective). And some argue that Bill Gates did more to help the world as profit-producing CEO of Microsoft (by giving millions of people access to technology) than he ever will as a philanthropist.

Others are better qualified to debate these issues. I'm simply calling us to pay attention to the inspiring, exemplary work of many Indian businesses that sheds new light on what it looks like to invest in human capital - both employees and society as whole.

The researchers behind this recent study are careful to point out that not all Indian businesses are characterized by what they found. And just as we can't simply take 10 principles of effective organizations from the U.S. and transfer them elsewhere, so also we ought to beware of simply thinking we can replicate the Indian model in other cultural contexts. So much of their commitment to social mission flows from the ebb and flow of Indian culture and society.

But let's not miss out on the lessons to be learned from India. It's fun to describe the way Google's work environment, complete with free massages and food contributes to their success. But let's also talk about how Indian companies have remained viable while also building complete communities for their employees and families.

Remember that India's economy barely felt the recent "Great Recession" and Indian companies have a track record of making the U.S. publicly-traded companies they acquire more profitable (financially and socially!).

If you have a chance to go share some of your expertise in India, go for it. But don't miss out on the nuggets of wisdom and success you can bring back home.

[The study referenced is from P. Cappelli, H. Singh, J. Singh, & M. Useem, The India Way, Academy of Management Perspectives, 24, 2, May 2010, page 6-24].

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About The Author

David Livermore
David Livermore

David Livermore is a thought leader in cultural intelligence (CQ) and global leadership and the author of "Leading with Cultural Intelligence". He is president and partner at the Cultural Intelligence Center in East Lansing, Michigan and a visiting research fellow at Nanyang Technological University in Singapore.

Older Comments

The point that you duck is that American capitalism appears to be destroying the very society that spawned it. Whereas the benefits of capitalism were showered on the many during much of the latter half of the 20th century, now they are increasingly concentrated in the hands of the few. Of course, if US corporations continue to destroy the US middle class, they will have no domestic markets left for their products and services. But such long-term thinking appears to be beyond the intelligence of US CEOs who, after all, care little for the future as long as they can enjoy their multi-million dollar remuneration packages.

Sanjay

What a great article! The company I work for was recently been taken over by an Indian conglomerate. One of the first rumours to circulate was with regards to the social policy they use. I'm very proud to tell customers, colleagues and friends about the longer term, sustainable vision this organisation seems to have. I hope they can maintain these principles and values while competing with Western companies whose vision is limited to short term cash.

Keith

Thanks for an interesting read, i just wld like to add - although many profit-making-business owners gave more to the world through their business interests & services, i think charity yet bring improvements in areas constantly left out otherwise..cheers, G

Gaurav Delhi - India

sanjays comment about 'american' capitalism particularly interesting,im not american,and while america has made contributions,america is not alone in the world is it really realistic to brand market complexities as national?

probably not,as we move from nation state to global process, maybe we need, some more inclusive and complete orienations, and your comment sanjay is interesting nonetheless.

as to social purpose in business, i remember when i visited india i was struck vividly by what appeared to be over staffing,but that made work made work and provided much needed opportunity....

perhaps we,with our western values( frankly ive nevedr been able to truely ascertain what the west values,have you? perhaps we with our western values, have become far too effecient?

Which will sound odd to some ears that, that too efficient is actively undesirable..

im reminded of thats business consultant who will be known to some ,her name is mary poppins, and her business advice? most efficatious,in every case...

discuss?

trine uk

Thanks for the lively interaction. Each of you is pushing me to think further on this. Sanjay--there are many aspects of your concern that resonate with me, but I'm reluctant to broadly lump all US CEO's into one greedy batch. Admittedly, the recent news about Wall Street bonuses makes it harder and harder for me to defend them...but I also continue to meet some very socially conscious CEO's who while attending to their bottom lines, also want to be very humane organizations. Regardless--your point is well taken!

I identify with the call toward increasingly global ways of thinking about and structuring business. I think we're a long way from abandoning nationally-specific forms of business by simultaneous with that--how do we develop more globally informed approaches.

I look forward to ongoing interactions like these!

David Livermore Singapore