The Newest Book on the Corporate Responsibility Revolution
CRO POV: Review of World, Inc.
By Jay Whitehead
Reviewed March 12, 2007
I know that you promise to catch up on your reading each time you take a long plane flight or a vacation. But somehow, something always gets in the way. The flight attendant serves that second glass of attention-draining champagne. The pool waiter brings that very distracting plate of nachos. Or your spouse or kid gives you a project that becomes your very own all-dominating Battle at Waterloo.
That's why you come to CRO POV. In just three minutes it makes you feel smarter and less guilty. It scratches that catch-up-on-your-reading itch, without the need to commit eight uninterrupted hours to flipping pages. Give me your next three minutes and you will capture the essence of a soon-to-be-published business book classic.
The newest popular business title in the tradition of Thomas Friedman's The World Is Flat, Alvin Toffler's Future Shock, Peters and Waterman's In Search of Excellence, Levitt and Dubner's Freakonomics, Jim Collins' Good To Great, and Malcolm Gladwell's Tipping Point is Bruce Piasecki's World Inc. (Sourcebooks, $24.95, available April 2007; see Sourcebooks.com). Once it appears in a month or so, you should buy it, if just to make people think you read it. (Just in case you never get to finish it, though, print out today's CRO POV and slip it inside the book for that quick pre-cocktail-party refresh.)
World Inc. is a manifesto for the corporate responsibility revolution. The book's heroes are "social response capitalists," examples of which include leaders at GE, Toyota, HP, S&P, Whirlpool, Tom's of Maine, Innovest and Suncor. Spurred on by the swiftness of new global market news and the severity of social changes including climate change, energy price hikes and leadership crises, Piasecki makes this sort of corporate responsibility heroism nothing short of the new capitalist imperative.
Piasecki previously wrote a minor 1990 classic, In Search of Environmental Excellence, which established his chops as a green guy. And his new journal, Corporate Strategy Today, makes him a made man in the strategic consulting universe. But in World Inc., he breaks out of the shackles of a mere consultant or enviro-dude. He spells out a cohesive world view, including new practices such as "sistering of innovation" among competitors, and a focus on practical realities such as the challenge of building leaders worthy of trust on social leadership issues and measuring success.
For Piasecki, the quintessential "social response capitalist" is Hewlett-Packard's former CEO Carly Fiorina. For him, Fiorina amplified the enlightened sense of global citizenship that HP's founders Hewlett and Packard originally built into the company. Fiorina's leadership, Piasecki claims, is the primary reason that HP is now the world's largest technology company, having overtaken IBM in January 2007. The fact that 80% of HP brand products are made by outside suppliers, Piasecki says, is testimony to the strength of the company's globally conscious culture, and reflects its manic focus on high supply-chain labor standards and a tireless search for ever-more-sustainable practices.
This is all good stuff. But as a corporate manager, I want something practical I can use now. This is where Piasecki pulls away from the pack. His last two chapters focus on money measures that matter to the broader corporate markets for talent, product sales and capital. He outlines the financial metrics (P&L, debt, magnifier effect) and customer measures (satisfaction, retention and complaint resolution) that are lagging indicators of effective corporate responsibility practices. He also focuses on the little-mentioned but all-important forward-looking measures, process metrics (cycle time, productivity, multiplier effects such as CST) and employee measures such as satisfaction, development and retention. Without these forward-looking measures, modern companies are managing through a rear-view mirror and face a high risk of being blindsided by a competitive threat.
In an ideal conclusion, Piasecki points out the magical power of comparative ratings and third-party measurement to spur companies to new competitive levels. (I must admit, though, that I have a hard time forgiving the author for failing to mention CRO magazine's 100 Best Corporate Citizens list as compiled by CRO and KLD Analytics, arguably the most-followed list in the corporate responsibility space.) Starting now, corporate leaders need to know more about how to cost-effectively measure the impact of responsible corporate practices, and what practices or outside services really help companies impact these measures.
In particular, the author highlights the ratings services such as Core Ratings/Fitch/DNV, Value Creation Index, IRRC/ISS, Calvert, Innovest and the granddaddy of them all, the $2 billion S&P unit of McGraw-Hill. These ratings services are bringing the once cottage industry of socially responsible investing, which now represents under 5% of equity investing, to the other 95% of investors. These new-age ratings are now incorporating more intangibles including the hidden value of sustainable practices and assignment of corporate responsibility-related forward-looking risk premiums.
Piasecki's book reminds me that the difference between a forgettable and a memorable business book is one thing: a hidden and enduring idea suddenly made tangible. In Thomas Friedman's World is Flat, we saw globalization come alive. In Freakonomics, we saw the perverse hidden results of out-of-whack incentives. In Tipping Point, we saw market hysteria laid bare. In World Inc., we see that demonstrating measurable impact of responsible corporate practices is the secret to moving corporate responsibility from mere "defensive" activities such as compliance and governance to "offensive" strategies that help companies raise capital, sell product and recruit talent. Because we can now see corporate responsibility's positive impact in the results of HP, GE, Toyota and others, and we can make money if we follow the guidance of corporate responsibility-aware ratings services such Innovest, IRRC/ISS, Calvert and S&P, corporate responsibility is suddenly tangible. Corporate responsibility is no longer merely an aspiration. It is proven. It pays. You can take it to the bank.
So now, before you do anything else, print this CRO POV to remind you to buy World Inc. when it appears in April. Just before that next corporate cocktail party or board meeting, whip out the book and speed-read this review. As a result of this silly trick, I predict you'll be remembered as the savviest person in the room. You can thank me later.