Greed Is Not Good, But Profit Should Be
For business to rise to the “noble vocation” Pope Francis has said it can be, we need to apply principles like the ones Charles Koch champions.
Charles Koch’s best-selling Good Profit is the best business book I’ve read since Jim Collins’ blockbuster Good to Great. In the book, Koch introduces Market-Based Management (MBM) as the key to the staggering success of his company, Koch Industries.
That’s the topic we explored recently on our campus at the Good Profit conference. The event, co-hosted by the Busch School of Business and Economics at The Catholic University of America and the Napa Institute, drew over 400 business owners, clergy, scholars, and students. We explored the difference between good profit and bad profit and how business can be a force for good in society.
The impetus to discuss Good Profit, as well as to host Charles Koch, came from a desire to see Catholic Social Teaching applied in the real world of business.
CST and MBM
Charles Koch is not a Catholic. Still, there’s an eerie overlap between the principles of MBM and Catholic Social Teaching (CST). That teaching is built on four pillars: the dignity of the human person, subsidiarity, solidarity, and the common good. MBM emphasizes, among other things: personal fulfillment, virtue and talents, decision rights, customer focus, humility, and respect.
One major premise of Good Profit is that not all profit is good. In the age of Martin Shkreli and Bernie Madoff, we all know how the quest for profit can go bad. Koch explores how profit can benefit society. He’s hardly alone in this view.
“Good profit comes from making a contribution to society,” Koch writes.
“Many people think profit is a taking away from society,” said Michael Porter of Harvard Business School. “Actually profit is the enabler of the wealth creation in society. We have to get people to understand that profit isn’t bad.” Porter was addressing small, DC-area business owners on our campus this fall, all of whom hope to have profitable enterprises.
“If it’s based on abusing vulnerable workers, that’s bad profit,” Porter continued. “But we shouldn’t tag the whole concept of profit with that.”
Good Profit is about how businesses can provide goods that are truly good and services that truly serve. These are things that provide value to the consumer and allow workers to feel justly proud. “Good profit comes from making a contribution to society,” Koch writes, “not from corporate welfare or other ways of taking advantage of people.”
Good Profit in Action
One of the pillars of Catholic Social Teaching is “subsidiarity.” It holds that decisions should be made at the level of authority that is closest to the problem. What Koch calls “decision rights” applies this principle in the workplace. Koch thinks employees closest to a decision should have the authority to make them. Employees should gain more “decision rights” over time as they prove their skill. This not only empowers employees. It creates a culture of ownership and initiative. That’s bound to make them better and more satisfied employees. And they in turn provide better service to customers.
Subsidiarity is close to another pillar of Catholic teaching: human dignity. In the words of Pope John Paul II, “Human persons … are imprinted with God’s image. Their dignity does not come from the work they do, but from the persons they are.” In other words: people first.
Koch has a similar insight. His MBM emphasizes respect for others and a focus on customers. He also recommends that businesses match responsibilities with individual talents, rather than pigeon-holing employees in a static “job description.” When people’s jobs are matched to their talents, they flourish. A company enjoys more creativity and energy from its workers than it would if its org charts were set in stone.
These are but two examples of the fruitful lessons gleaned from Good Profit.
For business to rise to the “noble vocation” Pope Francis has said it can be, we need to apply principles like the ones Koch champions. Greed and corruption aren’t just bad for the soul. They’re bad for business. “Imagine how productive business would be,” Koch reflects, “if everyone acted with complete integrity, with their word as their bond, never doing anything they wouldn’t want exposed to the whole world.”