In his excellent book A Business and its Beliefs: The Ideas That Helped Build IBM, Thomas Watson Jr. (the second chief executive of IBM) gives us five great lessons on business success.

From the time of our divisional reorganization we have found that an ingrained understanding of the beliefs of IBM, far more than technical skill, has made it possible for our people to make the company successful. 

In looking back on the history of a company, one can’t help but reflect on what the organization has learned from its years in business. In thinking specifically of the period since the war when IBM faced the twin challenges of great technological change and growth, I would say that we’ve come out with five key lessons. They may not be applicable to all companies. All I can do is attest to the great value these five lessons had for us. 

1. There is simply no substitute for good human relations and for the high moral they bring. It takes good people to do the jobs necessary to reach your profit goals. But good people alone are not enough. No matter how good your people may be, if they don’t really like the business, if they don’t feel totally involved in it, or if they don’t think they’re being treated fairly — it’s awfully hard to get a business off the ground. Good human relations are easy to talk about. The real lesson, I think, is that you must work at them all the time and make sure your managers are working with you. 
2. There are two things that an organization must increase far out of proportion to its growth rate if that organization is to overcome the problems of change. The first of these is communication, upward and downward. The second is education and retraining. 
3. Complacency is the most natural and insidious disease of large corporations. It can be overcome if management will set the right tone and pace and it its lines of communication are in working order. 
4. Everyone — particularly in a company such as IBM — must place company interest above that of a division or department. In an interdependent organization, a community of effort is imperative. Cooperation must outrank self-interest, and an understanding of the company’s particular approach to things is more important than technical ability. 
5. And the final and most important lesson: Beliefs must always come before policies, practices, and goals. The latter must always be altered if they are seen to violate fundamental beliefs. The only sacred cow in an organization should be its basic philosophy of doing business.

The British economist Walter Bagehot once wrote: “Strong beliefs win strong men and then make them stronger.” To this I would add, “And as men become stronger, so do the organizations to which they belong.”

From Harvard Business Review on August 23:

On Monday, 181 CEOs — from top companies including Apple, Walmart, JPMorgan Chase, and Johnson & Johnson — acknowledged that firms do not exist only to serve shareholders. In a statement issued by the Business Roundtable, a corporate lobby group, they affirmed a commitment to “all of our stakeholders.” Those include customers, employees, suppliers, communities, and — last but still very much not least — shareholders.

It’s a welcome shift. In 1970 the economist Milton Friedman made the case in the New York Times that management’s sole obligation ought to be maximizing value for shareholders. Over the past few decades, that view became commonplace in many boardrooms and business schools and on Wall Street. But there have been dissenters, especially in recent years.

In a 2017 HBR article, Joseph Bower and Lynn Paine of Harvard Business School argue that the shareholder-centric view “is flawed in its assumptions, confused as a matter of law, and damaging in practice.” They write that “a better model would recognize the critical role of shareholders but also take seriously the idea that corporations are independent entities serving multiple purposes and endowed by law with the potential to endure over time.”

To which I say: It’s about time.

I love Milton Friedman, but he got this one wrong. The purpose of a corporation is not simply to make a profit but to make the world better. The best businesses have always understood this and seen their own companies in this way. Jim Collins’ excellent chapter “More than Profits” in his classic Built to Last, for example, brings together dozens of incredible quotes on this. For example:

We’ve also remained clear that profit — as important as it is — is not why the Hewlett-Packard Company exists; it exists for more fundamental reasons. — John Young, Former CEO, Hewlett-Packard

We are in the business of preserving and improving human life. All of our actions must be measured by our success in achieving the goal. — Merck & Company, Internal Management Guide, 1989

We try to remember that medicine is for the patient. We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been. — George Merck, President and Chairman, Merck & Company, 1925 – 1957

We are workers in industry who are genuinely inspired by the ideals of advancement of medical science, and of service to humanity. — George Merck II (once again, because it’s so good)

Sony has a principle of respecting and encouraging one’s ability…and always tries to bring out the best in a person. This is the vital force of Sony. — Akio Morita, Co-founder, Sony

I think many people assume, wrongly, that a company exists simply to make money. While this is an important result of a company’s existence, we have to go deeper and find the real reasons for our being. … Our main task is to design, develop, and manufacture the infest electronic [equipment] for the advancement of science and the welfare of humanity. — David Packard, co-founder, Hewlett-Packard

Service to customers comes first … service to employees and management second, and … service to stockholders last. — Robert W. Johnson, Co-founder, Johnson & Johnson

Man’s objective should be opportunity for greater accomplishment and greater service. The greatest pleasure life has to offer is satisfaction that flows from…participating in a difficult and constructive undertaking. — Bill Allen, Former CEO, Boeing, 1945 – 1968

Putting profits after people and products was magical at Ford. — Don Petersen, Former CEO, Ford

Collins also shows that the companies in his study who saw their purpose as more than making money actually made more money than their competitors who didn’t.

This is in line with the biblical purpose of business, where every sector of society exists for the service of people.

However, if business exists to bring good into the world, then how does it differ from the non-profit sector?

The answer is that “more than profit” does not mean “other than profit.” The mandate of business is to bring good into the world in a way that is profitable for the long-term . So profit is essential to the nature of business. It is simply not the only, or even most ultimate, purpose.

In the Christian view, a corporation exists to do good for the world in a profitable way. In so doing, it must give appropriate attention to the needs and interests of all stakeholders, not just the shareholders.

For more on this, see also the excellent book A Sense of Mission, which brings together additional academic research showing that companies who have a purpose beyond making money perform better. [I can no longer find it at Amazon, but here is a short summary.]

Thomas Watson, Jr., the second president of IBM and 16th US ambassador to the Soviet Union:

I firmly believe that any organization, in order to survive and achieve success, must have a sound set of beliefs on which it premises all its policies and actions. Next, I believe that the most important single factor in corporate success is faithful adherence to those beliefs….Beliefs must always come before policies, practices, and goals. The latter must always be altered if they are seen to violate fundmantal beliefs.

Note that: if your policies are inconsistent with your beliefs, you change your policies — not your beliefs. So many companies do the opposite, saying they value people all the while enforcing policies that communicate anything but that.

Of course, the way you know whether a company (or person) really believes something is by what they do.

So what are companies that institute person-depleting policies really saying?

From Tim Keller and Katherine Leary Alsdorf’s Every Good Endeavor: Connecting Your Work to God’s Work:

The gospel-centered business would have a discernible vision for serving the customer in some unique way, a lack of adversarial relationships and exploitation, an extremely strong emphasis on excellence and product quality, and an ethical environment that goes ‘all the way down’ to the bottom of the organizational chart and to the realities of daily behavior, even when high ethics mean a loss of margin.

In the business animated by the gospel worldview, profit is simply one of many important bottom lines.

Keller nails it here. It is also very interesting that his statement that profit should be only one of many bottom lines syncs up with the research of Jim Collins. In the landmark book Built to Last, Collins’ research shows that the most profitable companies actually don’t put profit first — they put the customer and the mission first.

This doesn’t mean they don’t seek profit (just as Keller isn’t saying not to seek profit). Rather, it’s that they realize that profit is not the point. Making a contribution and serving the customer is. You have to do this in a profitable way, but ironically, Collins’ research shows, you will be more profitable when you pursue more than profit rather than just profit. 

And so here we see that the nature of a gospel-centered business is very much in line with what the best business research is showing as well. Common grace and the gospel are allies, not opponents.

An excellent summary of the best principles for making organizations effective today by Eric Schmidt,  executive chairman at Google. And here’s his book, How Google Works.

From the latest issue of Fast Company. Here’s the summary:

A treasure trove of unearthed interviews, conducted by the writer who knew him best, reveals how Jobs’s ultimate success at Apple can be traced directly to his so-called wilderness years.

By the way, if you aren’t a subscriber to Fast Company, you need to be. It gives the best insight on the new world of work, and shows how work is not supposed to be boring or constrained.

You won’t regret subscribing, and there’s no excuse not to. And, you need to subscribe to the actual physical magazine, because it is much more fun than just reading it online (and it’s easier to remember, in my view at least). Plus, with any print subscriptions you now get their iPad app so you can read it digitally each month if you prefer.