In the late 1870s Britain had emerged from the industrial revolution. Cities were filled with newly built, menacing factories. But the conditions were appalling. Alongside newly built work houses were the newly emerging city slums. An industrialist called George was greatly disturbed by the ‘sweat-shop’ factories in Britain’s cities. The factories were too small for fast growing businesses. So George decided to build his next factory in the countryside. Then there would be no limitation on space. George was also keen to ensure that his employees would have good living conditions. So alongside the factory, George also built a new town for his employees. And he made certain to charge affordable rents. George had a fruit tree planted in every back garden. And he provided numerous recreation facilities for his workers.
- The new town was named Bourneville. And George’s family name was Cadbury.
A remarkable business modelLord Brown’s book, Connect makes a bold proposal. Browne believes that a business should exist for the benefit of its ‘stakeholders’. Browne explains:
The success of a company depends on its relationships with the external world, not just customers and investors but also employees, regulators, politicians, activists, NGOs, the environment and technology. Choices made throughout the business, from the boardroom to the shop floor, affect that relationship. For the company to be successful, decision-making in every division and at every level must take account of those effects.For Browne, this is the true essence of business. Time and again, companies forget that they exist for the people. And time and again, this causes companies to suffer greatly. On the other hand, businesses who embrace their responsibility towards their employees and the outside world flourish. McKinsey & Company’s research suggests that a business’s earnings may suffer by 30% if it fails to connect with its stakeholders in the manner Browne describes.
- The share price of companies that connect with their stakeholders, also benefits. McKinsey & Comapany’s reseach shows that ‘connecting’ businesses’ share prices outperform that of their competitors by more than 2% per year. This works out at over 20% over a 10 year period.
Don’t be put off by the fact this is book about business
For anyone who cares about ethics in business, and desires to see our world become a better place, this book is a must. Do not be put off by the fact that this book is about business. Browne is a wonderful historian and this is a book of stories & biographies.Browne’s historical accounts stretch back 2000 years (Browne recounts ancient Chinese business tales). And as a result of reading this book I also learnt about the British colonising of Zimbabwe and India. We cannot afford to be ignorant about these troubling histories if we wish to learn from our mistakes and understand how to create a better world. Many witin society will always have a negative attitude towards business. Business is seen as the enemy pillaging the people of their resources and their money. Browne teaches us that business has the power to forge a better world. Business can build an environment in which the people become the benefactors. Browne shows us how this can be done. This book will remain one of my key reference texts for many years to come.