BUILDING 360 ORGANIZATIONAL SUSTAINABILITY

Like perhaps other terms that have become staples of the management vocabulary, the word “sustainability” has come to mean several different things. But, as this author says and describes, sustainability means only one thing. The true and legitimate sustainable organization is only the one that strives for and achieves 360-organizational sustainability. Readers will learn how to build this rare, but highly desirable type of organization.

The terms “sustainable” and “sustainability” have become so ubiquitous that it should be easy to believe that senior management teams have a good understanding of the issue and are well under way in their efforts to build truly sustainable organizations. Unfortunately, for most organizations, this is but a superficial first-impression, as the facts around claims of “improved sustainability” point to quite a different conclusion.

One major problem with the concept of sustainability is that it has become “plastic” – joining words such as “improved,” “partner,” and “high-quality, and other such terms in the language of “MBA-ese.” Such words can mean anything, depending on the eye or ear of either the speaker or the listener.

To examine and arrive at a real understanding of the concept of sustainability, it is best to start by returning to look at its generally accepted definition – itself something that still needs to be clarified. This article will attempt to arrive at a definition that accurately describes the truly sustainable organization.

Sustainability: A definition

There are now numerous different ways to define “the sustainable organization.” One recent popular version defined it as one that “contributes to sustainable development by delivering simultaneously economic, social and environmental benefits – the so-called triple bottom-line.” This version is useful, but it is malleable and certainly incomplete.

Turning to a dictionary and a thesaurus, the verb “to sustain” is defined as “to maintain” or “to endure.” A fuller definition is “being a method of harvesting or using a resource so that the resource is not depleted or permanently damaged over an extended period of time.”

Therefore, when asking ourselves whether something is “sustainable,” we should be asking ourselves the following questions: Is it maintainable? Can we endure it? Over the long-term, are our resources being depleted or permanently damaged? These are closed questions demanding a “Yes or “No” answer. There is no room for malleability. Something cannot be “increasingly sustainable” or “more sustainable.” It either is sustainable or it is not.

Using this clear definition, the assessment of whether an organization is truly sustainable becomes quite simple, though perhaps even more challenging to address.

Sustainability: The resources missing to complete the analysis

Most debates around organizational sustainability focus on the impact an organization has on the environment due to its use or misuse of resources. This is indeed a very important discussion. However, considering only this one challenge is insufficient – it is but one dimension of the debate. We need to do the equivalent of a 360o performance evaluation – that is, analyze our sustainability from all possible perspectives.

To carry out such a comprehensive analysis, four different inter-related resources need to be examined in order to determine if each one is sustainable. These resources are:

  • the organization itself,
  • its human resources (both inside and outside of the organization),
  • its community/society/ethno-sphere, and
  • the planet’s biosphere (the environment).

The formula for determining 360-organizational sustainability is then simple: If any one of these resources is not sustainable, i.e. not able to be maintained or is being depleted or permanently damaged over the long-term, problems for the other three will develop over the long-term. For an organization, the reality test is that if any of the other three resources are not truly sustainable, neither is the organization.

The following sections briefly highlight the current level of sustainability and the best practices to manage each of these four resources.

The organization: Is it sustainable?

The management of today’s organizations spends a lot of its time ostensibly trying to manage the sustainability of their organizations by managing the health and performance of their financial assets, production equipment, intellectual property, computer systems and the likes. Given this investment, one would at least expect that the organizations would prove to be sustainable. Unfortunately, however, there is evidence that management, particularly in larger, public companies, is struggling to make their respective organization sustainable.

A brief review of some of the literature of the past ten years examining corporate sustainability produced the following results:

  • Chris Zook & James Allen found in the 2001 study, “Profit from the Core,” (Harvard Business School Press) that only 13 percent of their sample of 1,854 companies were able to grow consistently over a ten-year period.

  • Richard Foster & Sarah Kaplan in their book, Creative Destruction, concluded that only 160 of 1,008 companies they examined were able to survive from 1962 to 1998.

  • Jim Collins in Good to Great, examined 1,435 companies over 30 years (1965-95) and found that only 126 (9 percent) had managed to outperform equity market averages for at least a ten-year period.

  • The First Standard & Poor’s Index, featuring 90 major U.S. companies, was created in the 1920s. The companies on that original list stayed there for an average of 65 years. By 1998, the average anticipated tenure of a company on the expanded S&P 500 was 10 years.

By any measure of “sustainability,” this performance is not a great advertisement for the performance of senior management in our larger organizations and their current management focus and philosophy. Smaller, privately-owned or family-owned businesses do tend to have greater longevity – but many do not achieve long-term, consistent growth or performance improvement – not do they aim for that. Survival is their objective. Michael Raynor in his book, The Strategy Paradox, probably summed current performance up best when he stated that “A 10 percent probability of succeeding in a quest for sustained growth is, if anything, a generous estimate,” and that “Mere survival for a company over a ten-year period is actually a pretty high bar.”

For many organizations, high-rates of senior management turnover, internal power structures, pressure due to quarterly financial reporting and the intense scrutiny of shareholders, management focus remains squarely on short-term performance. This is mainly due to the reward systems, which recognize and value performance in the short term, i.e., they have goals which are never really intended to be sustainable.

Given the depressing statistics, is it too much to conclude that the way we have been managing our organizations is quite simply “unsustainable” and that we need to consider sustainability in a new more comprehensive and rigorous way?

Be honest: Over what time horizon is your organization really being managed? Is it for the next quarter or the next decade?

Employees (at work): Are they sustainable?

In almost all organizations it is now clearly written on their website or annual report that their employees are their most important assets. If that were true, then surely finding a way to ensure that this asset is sustainable would be a CEO’s most crucial task. Yet, while most organizations go to great lengths to protect and maintain their financial assets, their production lines, their IT systems, their intellectual property etc those investing in programs that seek to ensure employee work-life-balance or “Well-being” etc are still the exception and not the rule. This despite the fact that most of the organizations doing so have been able to demonstrate financial returns on the order of 3:1 for every dollar they have spent on such programs.

  • In 2006, in a study by Buffett & Co, 78 percent of employers stated that “work-related stress” was the top “health risk concern” for their employees’ well-being. However, only 32.5 percent of these organizations offered any type of stress management programs for their employees. Employment Assistance Programs (EAPs) were offered by 71 percent of the companies; however, EAPs are more a reactive than preventive tool for managing employee well-being.

  • In a 2007 employee survey carried out by Watson Wyatt in almost 100 organizations, employees stated clearly that the number one factor in leaving any organization was workplace stress. Lack of work-life balance was second. Both these factors are major factors in undermining employee health and their long-term sustainability in any position.

    Revealingly, in the same study, employers stated that they assumed that the top five reasons for leaving, in order of importance, were an employee’s base salary, career development opportunities, promotion prospects, strained relationships with managers, and in 5th and last place, stress.

  • In 2006, The Globe and Mail newspaper reported that one in five Canadians now work over the weekend. Twenty percent also work an average of 8.5 “unpaid” hours per week. Many large organizations are quite happy to give out “free” Blackberries to their employees in return for 24 X 7 availability. In 2008, 48 percent of respondents to an Ipsos-Reid poll said that technology means that it is difficult to “get away from work” while on vacation. Twenty-nine percent of Canadians report that they do not use their full vacation allotment.

What would happen to the VP of Manufacturing, IT, IP or finance if they mistreated the assets that they manage?

How many organizations are actually designed and built around the assumption that employees are their most important asset? Most are still structured for the industrial era not the knowledge era. It would appear that all but a small percentage of organizations (see the list of “50 Best Companies to Work For” in any given country) have abandoned any pretence of forming and sustaining any long-term relationship with even their most strategic employees.

The dominant prevailing practice remains that of extracting the maximum from any given employee in the short-term, while assuming that there will always be someone ready to take up the position when the current asset is “used up”. The increasing number of contractual workers favours this practice. Does it work in practice? To date, for many companies, it has. But is it sustainable? For a few, the answer is “Yes,” but for many, the answer is a resounding “No.” Many employees are being “depleted” and in some cases permanently damaged by their employers’ demands for better short-term results and by their own expectations of more “success” (see next section).

In a survey of your employees, would they feel that they are treated as your organization’s most important asset? Do they feel like VIPs as they walk in through the door?

Employees (away from work): Is their lifestyle sustainable?

Life at work represents only one — albeit an important one — role that every person plays in life. Most, to be happy, successful or satisfied in their lives, need to have rich lives or success outside of work too.

For the past 50 years or so, the “sales pitch” for success in life in the industrialized world has been very simple yet powerful:

Success at work right arrow Wealth & Possessions right arrow “Success” right arrow

right arrowHappiness + Financial Security + Health + Family & Friends

However, in practice, many of us have found that this formula is incorrect and in fact more closely resembles the following:

Success at work right arrow Possessions right arrow ? right arrow

right arrow Dissatisfaction + Debt + Ill-health + Acquaintances & Broken Families

It is certainly true that we now have more possessions but, as a result, we are also heavily in debt. Is having lots of expensive possessions really a sign of success or is it a signal of something totally different? Given our more sedentary lifestyles and our “Supersize Me” culture, we are obese, unfit or unhealthy. We do not have time or energy for our old friends and family, the result of spending more and more hours chasing success at work. Studies show that North Americans do not feel any happier or more satisfied than they did 50 years ago.

Is such a feeling sustainable? The answer is clearly “No.” The British management thinker and author, Charles Handy, wrote many years ago that having “more of something” does not necessarily lead to more satisfaction. Unfortunately, this directly contradicts the powerful media messages sent by organizations and governments which reinforce the idea that the key to a rosy future is to continue, or in today’s context, to consume.

Today, many employees outside of the work environment are feeling increasingly dissatisfied with the lives they are leading. Just check the size of the “self-help” department in your local bookstore if you need some proof that people are looking for “something else.”

How sustainable are your lifestyle and consumption patterns?

The Community/Society/Ethno-sphere: Is it Sustainable?

According to data collected by MIT professor Peter Senge,

  • Despite all the “progress” made between 1975 and 2000, the poorest quartile of the world’s population saw its share of global income fall from 2.5 to 1.2 percent.

  • About 50 million people migrate each year from rural to urban environments seeking a better life – and often fail to find it.

  • Approximately, 500 million people still live in slums and shantytowns.

  • In Canada in 2001, according to Statistics Canada, the traditional family unit (mother, father, kids) represented only 44 percent of “families” in Canada.

  • Author and anthropologist Wade Davis states that of the estimated 6,000 existing languages around the globe, 25 are being lost each year – and the pace of this loss is increasing as the older generations pass away.

The sense that there is a lesser sense of community and belonging among people and families is difficult to quantify. Traditional cultures, dress, language and lifestyles, be they of countries, geographic regions, cultural communities or the family unit, have been devalued and, in some cases, set aside by younger generations seeking to taste the excitement of the new global (material) world that is now at their doorstep. The loss of local institutions, gathering places such as local churches, local post offices and pubs and the likes that once could rely on natural, inter-generational renewal to sustain them, now only serve as poignant examples of where a sense of “community” has disappeared.

Are our old communities sustainable? No, at least in the shape and form in which they exist today. The move of the “Second Life” generation towards being part of several different global “virtual” communities or groups via the internet certainly represents their efforts to fill a “community” space in their lives that is now lacking – and deemed by many to be essential for a sense of well-being. Will it prove a viable “substitute”? It is probably too soon to tell.

Is the focus on economic growth sustainable? In The Great Reckoning, published in 1993, co-authors Sir William Rees-Mogg & James Dale Davidson suggested that, one way or another, the world’s inequalities would, one day, disappear.

Is your own or your organization’s behaviour contributing to the weakening or strengthening of a desirable local or global community?

The Biosphere (Environment): Is it Sustainable?

It is easy to become sidetracked by either science or popular opinion as to the “why?” and “Who is to blame?” polemics. However, according to the data collected by Peter Senge, some things can be presented in stark black and white terms:

  • 50 percent of the world’s major rivers are heavily polluted
  • 70 percent of our fisheries are “chronically over-fished” world-wide
  • One-third of our forests were lost in the last 50 years
  • A surface area of topsoil greater than the size of China and India combined has been lost in the past 50 years
  • One-third of the ecosystems that provide clean water, air, fertile soil and pollination are in “significant decline” or “in danger” (UN Millenium Ecosystems Assessment)
  • The ice-cap at the North Pole is getting smaller by 9 percent each decade.
  • In 1999, with 5 percent of the population, the U.S. emitted 25 percent of the world’s carbon dioxide.

Is it sustainable? Clearly, it is not.

Is your own or your organization’s behaviour contributing to the weakening or strengthening of the local or global biosphere?

Building a truly sustainable organization

How did we get here? The answer is simple: Neither individuals, organizations, communities or governments have made 360-organizational sustainability their number one, over-riding priority.

Three-hundred and sixty-organizational sustainability is not a by-product of organizational performance, nor is it a public relations message trumpeting the organization’s corporate social responsibility. It is a strong and powerful vision, a shared value system, a strategic plan accompanied by measurable performance objectives.

Some individuals and their organizations have invested enormous time, efforts, energy and money to minimize their environmental footprint or to be carbon-neutral (Google Ray Anderson of Interface Inc (carpets), or Jeff Dunn of Bolthouse Foods {carrots}.) Other companies have invested enormously in employee wellness and work-life balance (see the SAS Institute and many others in the pharmaceutical and high-tech sectors). Many companies, even global multinationals, have made great strides in involving themselves in their communities, particularly by supporting local charities, shelters, sporting activities and the likes. These organizations are certainly better corporate citizens than many of their peers. However, a strong focus on being carbon-neutral or offering work-life balance is not sufficient to be truly sustainable. To have 360- organizational sustainability, an executive team must be able to answer “Yes” to all the following closed questions:

  1. Are we developing and exploiting our human resources in a sustainable manner?
  2. Is the wellness or work-life balance formula in our organization sustainable for all our employees?
  3. Are the lifestyles and ambitions that our employees have for the time they spend outside of the organization attainable and sustainable?
  4. Are the (local, national or global) communities of which we are part desirable and sustainable?
  5. Are we at least environmentally neutral in all our (and our suppliers, distributors etc) operations?
  6. Are we achieving growth and generating economic value?

To be able to answer “yes” to them all one day, management teams will need to fundamentally challenge the way they are viewing, leading and managing their organizations today.

Fig 1: The 360 Organizational Sustainability Model

Fig 1: The 360 Organizational Sustainability Model

The initial reaction to being challenged to think through the lens of 360-organizational sustainability is to raise the specter of the increased costs associated with doing so. Surely, any attempts to build 360-organizational sustainability will result in higher financial costs being incurred by the organization. This may be true in the short-term and even over the long-term. However, today, while we seek to avoid those potential costs, we are taking ourselves, our organizations, communities and ultimately the entire biosphere into a cul-de-sac of non-sustainability, with a very solid brick wall at its end. We just don’t know when we’ll hit it.

What economic price should we be willing to pay as an organization in order to be truly sustainable? Or, could it in fact prove to be economically beneficial to achieve 360- organizational sustainability? The strategic assumption that being “environmentally green” would mean higher costs was also pervasive when the environmental sustainability movement began to emerge. However, the leaders at companies such as Interface and Bolthouse Foods have shown that targeting only “biospheric” sustainability can actually give you a sustainable competitive advantage – while increasing profitability and reducing risk. Just imagine what rewards await organizations achieving 360- organizational sustainability!

Assuming markets are perfect, achieving such a goal will eventually be reflected in an organization’s value or share price – as the discount rate on future long-term cash flows into the organization will be lower and extend over a longer period of time than they will for a competitor who is judged to be non-sustainable.

The business world is clearly lacking leadership in the area of sustainability. Yet, as Bishop Desmond Tutu once famously remarked: “I am a leader by default, only because nature does not allow a vacuum”.

In the case of 360-organizational sustainability, there exists a huge vacuum at the moment, one that is full of opportunity just waiting to be filled by the leaders of tomorrow. The question is: Who will be the ones who step forward and fill it?

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