From Value Grabbing to Value Creating : Lesson for Leaders

Sage’s Whitepaper:

Delivering happiness, giftivism, and conscious capitalism all have common messages, one of which is “give forward.”

That is, you Create Value for someone, often without thinking of a reward. When companies start to understand that they have a greater purpose than just to make profits, they move from being Value grabbers to becoming Value Creators. They realize that the company’s purpose is to give to society and the world and, in the process, to employees, Customers, partners, and unions. In doing this, they are Creating Value for the stakeholders, and Customers in turn will help the company Create Value.

Imagine doing something out of the ordinary for the Customer, such as creating unexpected delight. The returns may not be immediate. In the long term the returns will
become visible.

I remember when I came back to India after living in the US for around 20 years; I was deeply capitalistic. A good friend, an industrialist asked me for some ongoing help, and I suggested we first negotiate what I would get paid. Everything was measured in dollars and cents.

A few weeks later, I went to meet a famous lawyer about helping me with a case. He said he would. I asked him what his fees would be. He got angry. He said I know your family and your grandfather who had attended my wedding and I cannot take money from you.

I walked out quite dazed and chastened. I appreciated there was something called lihaz (respect and consideration for others, having a concern, and being considerate) in the Indian world. The lawyer had given without any expectation from me. He got in me an admirer and a well-wisher in return.

And I learnt also to give forward, without expecting something in return. It is a satisfying experience.

This lesson is easier for individuals to accept. But when you make a corporate inanimate, it can only think in dollars and cents. Corporates are humans hiding behind the anonymity of the company, humans trying to be tough, and only concerned about profits. This is what happens when you convert from being just ordinary people to becoming company people.

Harvard Business School’s Professor, Brian J. Hall, calls this paying forward. Pavi Mehta in Giftivism echoes the same and gives wonderful examples of giving without expecting returns  or any-thing in return.9 Brian Hall calls this Value Creating behavior and he goes on to say this is a requisite for successful leadership. Winning leaders have a Value Creation mind-set where they do good turns on behalf of the organization without
expecting any returns.

Value Creation by definition increases Value and there is more to go around and share. The pie gets smaller or is shared by fewer when leaders are Value grabbers, who are trying to
maintain their place in the organization by any means.

Value Creators also create happiness, and they share credit and profits. They tend to be team players and work for the team.

Value grabbers tend to be Value destroyers in the long run. I remember when I worked with the University of Wisconsin to set up a campus in India, most Indian professors at Wisconsin were motivated by what they could get out of a campus in India, rather than the fact that an India campus would Create Value all around, for the State of Wisconsin, for the university and its stake-holders, and for India and Indian youth. By being Value seekers, they played a negative role.

Such people tend to be secretive, they get a sense of security by keeping their knowledge to themselves and not sharing it, because they fear they will lose out or others will become smarter than them. They destroy Value. And those who share knowledge encourage people to grow, and act as catalysts; those who teach people how to apply knowledge and Create Value are winners.

And this is true in negotiations. The “I must win at any cost” think-ing, the thought of having it all and not leaving anything on the table are Value grabbing syndromes. Many purchasing people are either taught to win or their ego wants them to extract all
they can from suppliers. When you ask them this is true, they will say, oh, no! We believe in a win-win with our suppliers. Carlos Cordon of IMD says this is often win-win for one side (the purchasing guy winning twice).

Purchasing people often do not try to create Value for their suppliers. The Value starved suppliers will seek to take revenge whenever they can. As an example, Nippon Steel
starved Nissan during a steel shortage, causing huge losses.

I had a boss, who taught me the art of reverse negotiation. Negotiate hard but then give something away, that the supplier will remember.

I recall negotiating an annual plastic resin contract for 33.0 cents a pound when the going rate was 32.5 cents. My reasoning included that we needed the supplier’s un-restrained support for new products, specification changes when required, and potential price increases. My purchasing director (who had negotiated the supplier down to 32.5 cents a pound) was aghast. But a few months later when the prices had gone up to 60 cents a pound, while our competition was forced to pay higher prices, we enjoyed lower prices for a period of time, a great competitive advantage.

Conscious capitalism suggests that companies should make the world a better place. Blatant denuding of the earth of its resources for short-term gain (like the illegal mining in the State of Haryana, in India; or the cheating in getting telecom licenses in India by Minister Raja and the companies he favored, or in getting illegal advantage in coal mining leases; or in the mortgage crisis in the US, born of greed) is Value and resource grabbing.
Large-scale Value destruction occurs as a result. Conscious companies or conscious executives will not participate in Value grabbing.

Pavi Mehta tells of her family charitable Arvind Eye Foundation, and eye care hospitals, where every patient is treated equal. His or her ability to pay has no bearing on the treatment. Everyone pays what they want to (not what they can). And those that pay more
than the treatment cost fund those who cannot pay. As an aside, Arvind’s cost structure is very low, as the volumes are high, and the cost of consumables and equipment is low. An eye doctor conducts a cataract procedure every three minutes in an assembly line
process.

Pavi talks about restaurants where this happens. Your meal is paid for and whatever you want to give for the meal is used to feed someone else. This is the paying forward concept.

Paul Polman of Unilever states that companies with a purpose beyond profits tend to create more shareholder wealth in the long run and have less fluctuation in share prices in the short run. Firms of endearment, a term coined by Raj Sisodia, David Wolfe, and Jagdish Sheth, that tend to have a purpose and practice conscious capitalism are shown to have 14 times greater returns than S&P companies, and 6.4 times the returns of good to great companies in 15 years.

McKinsey in “Redefining Capitalism” (written by Eric Beinhocker and Nick Hanauer) argues that capitalism has served the world well and has led to growth. However, CEOs and investors are at a crossroad today. Should the role of the business be to make money or advance the good for society? They conclude, “the essential role of capitalism is not allocation—it is Creation. Prosperity in a society is the accumulation of solutions to human problems.” Ultimately, the measure of the wealth of a society is the range of human problems it has solved and how available it has made those solutions to its people.

Thus, argues, McKinsey, instead of celebrating wealth, we should celebrate innovative solutions to human problems. I would contend that if done well, creation of wealth is another result of doing the right things for society and other stakeholders. Shareholder Value and profits are a result and a measure of how leaders work, not a goal. Such Value Creating leaders create happiness, not just profits, and are greatly successful.

Value Creation Pointers

• Value Creation by definition increases Value and there is more to go around and share.
• Delivering happiness, giftivism, and conscious capitalism all have common messages, one of which is “give forward” and, thus, Create Value.
• Giving forward and Value Creation is easier for individuals to accept. But corporates can also do this if they remember they are human and have employees who are humans.
• Winning leaders have a Value Creation mind-set.
• Value Creation by definition increases Value and there is more to go around and share.
• When leaders are Value grabbers, overall Value is decreased.
• Conscious capitalism and firms of endearment create higher shareholder returns.
• According to McKinsey, “the essential role of capitalism is not allocation—it is Creation. Prosperity in a society is the accumulation of solutions to human problems.”

 

About the Author

Gautam Mahajan is an internationally acclaimed expert in strategy, general management (including Customer Value), and globalization. He is President of Customer Value Foundation and Inter-Link Services Private Limited.

Founder editor, Journal of Creating Value jcv.sagepub.com
K-185 Sarai Jullena, New Delhi 110025
+91 98100 60368, 011-26831226
mahajan@customervaluefoundation.com
www.customervaluefoundation.com
http://www.interlinkindia.net, Twitter @ValueCreationJ

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