Let me continue the story of Stephen and the engineering division. Some time has passed and LargeCo has beneited greatly by transforming itself from a conventional organization into a more developmental, processoriented, learning one. The company's other division leaders now recognize Stephen and his engineering division as an “organizational development laboratory.”

One day, Stephen asks the president of LargeCo for time on the agenda of his core team. The core team is the organizational entity that the president consults with when developing the company's various functional and business leaders. As the head of the engineering division, Stephen is a member of that team.

It is the third anniversary of the day Stephen joined the company. The week before, he had decided that it was time to introduce a new idea to ensure that LargeCo's growth momentum will be sustainable.

In his presentation to the Business Council (which is what the president calls his core team), Stephen compliments the team on the success they and their people are having at growing people's competence and organizational effectiveness. LargeCo's productivity, quality, and customer service measures are all at historic highs, and so is morale within the company. But then he adds: “Growth can only be maintained if the company is sitting on a three-legged stool.” This gets their attention.

He continues: “We're adding tremendous value through our work at meeting the company's goals and objectives, and we're working together across the company in innovative, developmental ways. And, importantly, we're developing a strong developmental culture.” He observes that LargeCo is intensely focused on serving customers and developing people as leaders of positive change. They all should be proud of this, he tells them, but they should be taking action to always do the right things as perceived both by
the company's own people and by society at large – that is, by all stakeholders, broadly deined.

This sets the stage for a very rich conversation among the senior leaders of LargeCo. As the meeting wraps up, Stephen, the president, and the other senior leaders agree to create high-performance systems in the company that will be dedicated not only to adding value and working together effectively but also to doing the right things for society and for the company's other stakeholders. They agree to work together to design some of these systems and to do so quickly.

Stephen is leading the company to concentrate on serving all stakeholders, including society at large. This is something that many conventional organizations neglect to do.

If a high-performance work system is to generate sustainable growth, the people in that system must be highly motivated. The drive to increase valueadd can only be sustained if the people believe the work being done is the right work – that is, if it is virtuous work. Virtue in this sense can be deined as the willingness of people to strive for superordinate performance. So in this section I describe a number of leadership processes that can help foster a more virtuous organization under these three key headings:

• Creating a harmonious relationship with society

• Treating people fairly

• Making decisions to do the right things

Creating a Harmonious Relationship with Society

Much has been written about business organizations serving society's needs in addition to those of customers, employers, and shareholders. Over the years, this idea has been gaining acceptance as a legitimate and important criterion for the very best ethical business organizations. The reason to serve and support neighbouring communities is to avoid controversy and unrest. This is often called public relations, but just as often, it relects genuine concern for one's neighbours.

Of course, service organizations such as the Red Cross, the United Way, national engineering societies, and so on are business organizations in their own right and have speciic value-add mandates to serve society. By deinition, these kinds of organizations are dedicated to serving their society at a harmonious level of shared values. Their visions, strategies, missions, and actions are aligned to achieve shared purpose with speciic stakeholders. Service organizations are more similar to proit-oriented businesses than many of them want to admit. After all, they meet the needs of their communities and seek support from donors, who are really customers. They gather revenue by making value propositions to potential donors. They invest a great deal of effort in advertising and marketing in order to secure their donors' loyalty to their cause. So we can say that all business organizations, be they proit-oriented or not-for-proit, should be motivated (and some naturally are) to develop harmonious relations with society.

Most proit-oriented organizations demonstrate their commitment to serving society by dedicating money and human resources to that end. That is, they donate to communities and causes where social needs have been identiied. Sometimes these actions are of suficient magnitude that real emotional attachments develop between certain “causes” and the business organization. That is most often a direct result of individual leaders in the organization who are building support for speciic stakeholder communities within their organizations. For example, a senior leader in engineering may place a high value on giving to a speciic cause such as Habitat for Humanity. That leader will dedicate personal energy to developing support within the various organizations in his irm for that cause. In this way loyalty can develop between the business and the target community. In the high-performance work system of the developmental organization, creating harmony with society is deeper than individual leaders and their societal cause.

Creating harmony between the business and society strengthens the virtue of a high-performance work system. Creating harmony, in other words, is another way of doing the right thing – in this case, the right thing as seen by societal stakeholders as well as by speciic society members, employees, owners, and customers.

When employees recognize that their organization is dedicated to improving the lives of people everywhere, they will be inluenced to help improve their organization. They will be motivated to work diligently towards serving its needs as deined by their leaders. In the same way, customers will want to be associated with the business, which they perceive as working to improve the lives of people everywhere.

There is a systematic way of thinking about harmonious relationships between business organizations and society. In part one, a framework fully describing the capability of a person was proposed: function (what we do), being (how we do things), and will (why we are motivated to do things). This same framework designed for individuals can be extended to help us understand the capabilities of organizations as they do work. A business organization and society and the activities of each will be judged to be in harmony when their function, being, and will are aligned. At a functional level, society must perceive and understand that the products and services provided by a business are dedicated to improving the lives of people everywhere. For example, an automobile manufacturer will move towards this virtuous objective by improving the safety of its products without governments and public opinion forcing it to do so. Here, the key to aligning business with society is for the company to be perceived as doing the right things for the right reasons.

The alignment of “being” is a task of aligning emotions and spirit. This, at a societal level, amounts to a recognition that the business's actions are energizing to all people. The alignment of being is the alignment of the collective character of society with the character attributes of the business organization. If a business shows respect, honesty, cooperation, and genuine care and concern for its community, that community will accord that business the same.

To achieve harmonious relations, a high-performance business organization needs to develop consistent communications with society. This means telling society the truth about its actions inside and outside its own boundaries. When a company makes mistakes, it must admit them publicly, tell the community how it will repair them, and then repair them in a way that indicates the mistake will not be repeated.

The alignment of will between the high-performance work system and society at large is a result of the expenditure of large amounts of energy to create this broad base of understanding. It is the development of aligned operational philosophies. The philosophy that all societies everywhere in the world hold to be true transcends culture, religion, economics, and just about everything else. It is simply this: “Improve the lives of people.” All developmental organizations must adopt this operating philosophy. They must then develop processes to actualize that philosophy. For example, engineers and scientists from a local business organization may take time to engage with students to help them develop understanding and appreciation for engineering and science.

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