Compassionate Capitalism?

There is a whole industry devoted to trying to figure out if companies that treat their people well do better over the long run than those who apply themselves less assiduously to this saintly cause. It's quite fascinating how much attention is given to this subject, particularly in the U.S. where we have the double whammy of a political system that provides relatively paltry social safety nets compared to many other developed economies (particularly continental Europe) and a business culture that is immensely, ahem, 'flexible' (i.e. layoffs are a common early response to any downturn in revenues).

One book, Firms of Endearment does a nice job of making the case for the linkage between looking after your people and financial success, but it's notable that of 28 companies that made the 'Final Cut', only 4 of them hailed from outside the US, presumably as a sop to non-U.S. readers. Oh please, are we really saying that in a world as globalized as ours is these days, we cannot do a better job of recognizing that we might do well to learn more about what others are doing, and spend a little less time on comparing and contrasting what is happening inside one, albeit major, part of the world economy.

So, it's nice to see some recognition that companies outside the US with a focus on the welfare of employees do actually exist. In the NY Times on Sunday an article described a German machine tool manufacturer, Trumpf, that tries very hard to avoid layoffs during hard times. They don't always succeed, but they do try any number of creative alternatives before resorting to layoffs, including banking overtime hours during good times that can be called upon during tough times. Of course, Trumpf exists in a system that is the direct opposite of the US: in Europe, government supported social safety nets are substantial and employment law makes it hard for companies to layoff people unless they have a powerful case for doing so.

In the seventies we used to obsess about Japanese management systems, with many companies paying substantial amounts to learn about the Toyota Production System or something similar, but there seems to have been much less interest in hearing about, for example, the Scandinavian versions of social capitalism that have been so successful or about the strength of the German Mittelstand, or the effects of Confucianism on the success of many Asian companies.

Notwithstanding the different political and social choices that societies east and west make that result in these different systems, with long term unemployment creeping ever higher is this not the perfect time to broaden our horizons and look more deeply at the choices we make and revisit the question of the role of a company in society, it's obligations to the communities on which it depends for it's success and, indeed, our definitions or what constitutes 'success'?