Six Characteristics of Virtuous Organizations

A Roadmap Taken from Family Business Success

The notion of a virtuous organization is the result of an evolving, but grounded, field of study in the area of leadership and management that is something of a natural mash-up of ethics theory taken directly from Western philosophical masters, like Aristotle and Aquinas, and positivistic theorists, such as Seligman and Csikszentmihalyi[1] and Snyder and Lopez.[2] Together, the two schools of thought form a fascinating and grounded theoretical framework, with the cultivation of authentic virtue being the core of both a competitive business edge and healthy change within the broader marketplace.

Simultaneously, more attention has been devoted to global family businesses and their contributions to economies and societies. A recent special report in The Economist claimed that family firms are not only drivers of the global economy, but the trustees of “old-fashioned virtues” that extend beyond the immediate communities in which they operate.[3] Even though there is still a great deal of ambiguity and subjectivity as to how an organization might be virtuous, family businesses provide the best glimpse of what a virtuous organization might look like in practice.

Evolution of Virtue Theory and Practice

While family enterprise has been around for centuries, the idea that an organization might be virtuous is relatively new. In 2000, Surendra Arjoon’s seminal work, “Virtue Theory as a Dynamic Theory of Business,”[4] asserted that virtue theory “links the concept of virtues, the common good, and the dynamic economy into a unifying and comprehensive theory of business.”[5] In 2003, Kim Cameron et al. described virtuousness in organizations as “the best of the human condition, the most ennobling behaviors and outcomes, the excellence and essence of humankind, and the highest aspirations of human beings.”[6] Since then, other researchers have made significant contributions to the field,[7] [8] [9] receiving a further boost in 2013 in a special issue of the Journal of Applied Behavioral Sciences that emphasized the new theory: “to support the creation of positive, sustained ethical action in and by human systems.”[10] Bright and Fry’s introductory article for the issue, “Building Ethical, Virtuous Organizations,”[11] helped finally establish the concept of virtuous organizations as a legitimate business application.

Drivers for Virtue in Organizations

The notion of virtuous organizations is also gaining traction as some global corporations’ revenues rival the GDP of entire countries and more pressure is put on them to pay closer attention to everything, from how they manage manufacturing plant safety in second and third world countries to demonstrating their commitment to sustainability to paying taxes within the country they call home. These pressures are being further fueled by dissatisfaction with any well-written corporate code of ethics that is merely an inconsequential tic of the box toward ethical compliance. Though it looks good at the outset, in action, this code does not have much impact in facilitating consistent behaviors that actually demonstrate a higher level of aspirational being or behavior, either within organizations or the broader communities in which they operate.

Evidently, for an organization to be truly virtuous, it must reflect an authentic vision of responsibility to people and the planet that already existed within the individuals who make up that organization. While the goal is to offer aid or support for an identified need within the broader community, one of the beneficial results for the company is increased moral capital, both within the organization and the communities in which it operates. However, that bestowed sense of virtue is good only as long as the organization’s actions are viewed as consistent and authentic, and not as a component of its business or public relations strategies.[12] [13]

So, the organization merely serves as a container for the natural outcomes that may wind up being labeled organizational virtues.[14] From this perspective, corporate philanthropic actions are tied directly and genuinely to the values and vision of the people leading the organization. In the family enterprise, these values and vision are held and sheltered by the owning family, who then often traces the source of its unique approach to contribution, change, and giving all the way back to the founder of the original company. A great grandfather’s or grandmother’s view of the world and philosophy of helping out employees and neighbors can be a strong and long-lived driver of community contribution as a virtue for generations to come. The effective result of moral capital or virtue as a by-product or outcome is the defining parameter of a virtuous organization, rather than one that produces virtue as a product to be sold or used to increase sales. And virtue within organizations isn’t limited to smaller mom and pop companies, but rather seems to be built into the fabric of many companies, regardless of their size or scope. Given the subjectivity of measuring virtue in organizations, clues toward that end might be gained by examining some examples from family business practices that can be characterized as virtuous.

Examples of Family Businesses Characterized as Virtuous

The Austindo Group, Jakarta, Indonesia

The Tahija family owns The Austindo Group, based in Jakarta, Indonesia. The Tahija Foundation was established by the family to reflect their genuine and deep commitment to making Indonesia a better place. This rather large mission drives active work to preserve the environment and historical sites, and to promote education and healthcare. Ongoing endeavors include protecting Indonesia’s threatened waterways and coral reefs, promoting sustainable land use in pristine forest areas, excavating the remains of an ancient Hindu temple, and building schools. The family also oversees the “Eliminate Dengue Project,” which has garnered the attention and partnership of Bill Gates, to eradicate several devastating mosquito-borne illnesses, including dengue fever (http://www.asiabusinesscouncil.org/docs/newsletter/GeorgeTahijiamembernews.pdf).

In addition, the family’s enterprise, The Austindo Group, has a long-standing reputation in the broader region as a rare place that treats its people well and deals with everyone from employees to the government with integrity and honesty.

Reiter Affiliated Companies, Oxnard, California

The Reiter Company is a farming operation that has been family-owned and operated since 1868. It has expanded globally with operations in Mexico, Africa, and Europe.

The Reiter family’s commitment to organic and sustainable farming practices reflects the family’s efforts to be honest, fair, and respectful for farm workers. While not always easy to implement, the enterprise owners have worked to create a culture that supports workers by improving nutrition in their own families and supporting robust grant programs to strengthen the communities in which they work around the world to have an “impact on farm worker well being through an investment in education, health, and youth, family and community leadership” development (http://www.berry.net/philanthropy/local-giving-program/).

Lee Kum Kee, Hong Kong, China

This Hong Kong-based family business is known for high-quality, cooking and condiment products that are sold all over the world. The Hong Kong Council of Social Service has presented the “Caring Company Label” to the Lee Kum Kee company for many consecutive years. The acknowledgements have come due to the specific ways the company simultaneously cares for the community, its employees, and the environment. Its financial commitments have included everything from China earthquake relief funding to the development of sustainable manufacturing practices. This family’s continued emphasis on being socially and environmentally responsible has also resulted in the company being featured in the Hong Kong Economic Times “Corporate Social Responsibility Report” (http://us.lkk.com/en/AboutLKK/OverView).

Love’s Travel Stops, Oklahoma City, Oklahoma

This Oklahoma-based family business, run by the Love family, attributes its success to treating employees like family and valuing “all things local.” With more than 330 stores in 39 states, each individual store annually contributes to non-profits within those communities, while the corporate office annually donates 2 percent of profits to local Oklahoma City charities. It has also annually raised money for the Children’s Miracle Network Hospitals, totaling over $12 million to date (http://www.loves.com/AboutUs.aspx).

The Mathile Family Enterprise, Dayton, Ohio

Clayton and MaryAnn Mathile built the Iams brand of pet food products into a very successful company. When they sold it to Proctor and Gamble in 1999, they personally shared $100 million of the deal with employees, clearly demonstrating the family’s vision “to share its good fortune” through philanthropic excellence. Today, the Mathile Family Enterprise encompasses a variety of businesses, from video chat technology to providing capital that supports entrepreneurs. The Mathile Family Foundation specifically exists to “transform the lives of children” by actively supporting high-quality, affordable educational opportunities and “finding systemic solutions for children and families in need” by funding local scholarships and nutrition programs in impoverished areas. (http://mathilefamilyfoundation.org/about/).

Based on these real-life family business examples (and countless others), characteristics of virtuous organizations can be identified in a way that may serve as a roadmap for all businesses—family owned or not. In fact, enterprising business families may be the original creators of the virtuous organization since those virtues clearly reside within the family members that founded, governed, and own the companies. Characteristics of virtuous organizations in the Family enterprise include:

 

 

Table 1 - Kent Rhodes

Table 1: Six Indicators of Virtuous Organizations in the Family Enterprise

 

Six Indicators of Virtuous Organizations

Clarity in its mission as a family, not just as a business

Business families can articulate a purpose and vision for their work outside of the business (although they are usually linked), whether or not this vision is officially captured or presented. They understand the values shared among the broader family—sometimes between family branches—that define what is most important to them as a family. This perspective usually includes a larger community or philanthropic interest beyond the family itself. 

A strong sense of responsibility to give back

philanthropy words 200x150More often than not, families that own and operate businesses retain an understanding and appreciation of the humble beginnings and hard work that built something that provides a great deal for their family and the community—and not just for their own family, but for the families represented by their employees. They are likely to believe they have a responsibility to the betterment of the local community because of the wealth they have created and in which the community has likely played a part. This translates into an ongoing interest in, and the creative development of, tangible contributions to the needs of the community.

A high commitment to employees’ health and well being

Business-owning families tend to view and treat employees as extended family, resulting in workplace environments that support a balanced family life and sense of community. Even when the enterprise grows or expands into global markets, the core culture of the organization tends to carry this commitment and these supportive actions forward.

Giving and philanthropic involvement that is not politically centered

Given the commitment to a broader community and the diverse political perspectives of individual family members, most business-owning families do not view political contributions to specific politicians or political parties to be consistent with their desire to give back in a way that directly impacts people within the community or builds a sense of virtue within their own organizations. Rather, contributing to an established foundation or aid group with clearly specified needs and vision tends to be viewed as a more productive and immediate way to bring about change. These could include everything from the family’s own foundation to large organizations like the American Cancer Society or The Red Cross.

The maintenance of a long-term, generational view

Enterprising families tend to think generationally and as such, they also think about the impact they might have over the course of a longer-term story arc. Like their businesses, they are in it all for the long haul: Treating employees like extended family, giving to help alleviate a specific need, and supporting institutions toward success are all viewed as long-term commitments that are often passed from generation to generation, supported by stories of how the founder (grandpa or grandma) cared for people and wanted to make a difference in their lives.

Few (if any) overt references to themselves as ethical or virtuous

Business-owning families do not think about how they might appear more virtuous or about giving back to the larger community as a marketing or public relations strategy. They tend not to pay much attention to the latest trends in ethical thinking. Rather, their clarity of purpose drives their understanding of a day-to-day commitment and way of life. If they are viewed as helpful or virtuous, it is merely an outcome of their collective vision, commitment, and ongoing work, both within the enterprise and in the broader community.

Being a virtuous organization is indeed a lofty goal and organizations that deem themselves to be such or hope to attain these defining characteristics can take a cue from family businesses. Kim Cameron perhaps put it best, asserting that virtuousness is not only about moral goodness but also social betterment. “Virtuousness creates social value that transcends the instrumental desires of the actor. It produces benefit to others regardless of reciprocity or reward.”[15]

Call to Action

In moving into the future, corporations and organizations stand to benefit both in terms of sustaining ethical business dealings and creating value-added aspects to their work by incorporating a conversation about what it means to be virtuous, beyond the theory.[16]

Whether or not virtuous organizations become the norm, family businesses will continue to be shining examples of what a business can produce, both in terms of financial reward and social value, that results in virtue as an outcome benefitting both the business and the community. As such, further analysis and research into the potential links between the family firm and its demonstrative practice of virtue deserves further attention in the areas of organizational development and leadership.

 

[1] Seligman, M.E.P., and Csikszentmihalyi, M. (2000) “Positive psychology: An introduction.” American Psychologist, 55: 5–14.

[2] Snyder, C.R., and Lopez, Shane J. Handbook of Positive Psychology. (New York: Oxford University Press, 2002).

[3] The Economist (April 18, 2015). “Special Report: Dynasties, the enduring power of families in business and politics,” 415, no. 8934: 6.

[4] Arjoon, S. (2000). Virtue theory as a dynamic theory of business, Journal of Business Ethics, 28: 159–178.

[5] Ibid., pg. 159.

[6] Cameron, K. “Organizational virtuousness and performance.” In K. Cameron, J. Dutton, and R. Quinn, eds., Positive Organizational Scholarship. (San Francisco: Berrett-Koehler, 2003).

[7] Bright, D., Winn, B., and Kanov, J. (2014). “Reconsidering virtue: differences of perspective in virtue ethics and the positive social sciences,” Journal of Business Ethics, 119: 445–460.

[8] Ahmed, P. and Machold, S. (2004). The quality and ethics connection: Toward virtuous organizations, Total Quality Management, 15, no. 4: 527–545.

[9] Stansbury, J. M., & Sonenshein, S. (2012). Positive business ethics: Grounding and elaborating a theory of good works. In K. S. Cameron & G. M. Spreitzer (Eds.), Handbook of positive organizational scholarship (pp. 340–352). New York: Oxford University Press.

[10] Bright, D. and Fry, R. (2013) Introduction: Building ethical, virtuous organizations, The Journal of Applied Behavioral Science, 49, no. 1: 5–12.

[11] Ibid., pg. 5.

[12] Godfrey, P. C. (2005). “The relationship between corporate philanthropy and shareholder wealth: A risk management perspective,” Academy of Management Review, 30: 777–798.

[13] Bright, D. (2006) DIALOGUE: “Virtuousness is necessary for genuineness in corporate philanthropy,” Academy of Management Review, 31, no. 3, 752–756.

[14] Bright, 2014.

[15] Cameron, K., and Winn, B. “Virtuousness in organizations.” In K. Cameron and G. Spreitzer, eds., The Oxford Handbook of Positive Organizational Scholarship. (Oxford University Press, 2011).

[16] Bright, 2014. Ahmed, 2004.

Author of the article
Kent Rhodes, EdD
Kent Rhodes, EdD,

, serves as a participating faculty member at Pepperdine in the area of Organizational Behavior, Theory and Leadership. He is an entrepreneur who maintains a successful coaching and consulting practice for a variety of privately held and family-owned enterprises. Rhodes founded OnCourse Network, Inc., an Internet education company, and served as chief executive of the company. He successfully negotiated the sale of the company to a Silicon Valley publicly traded corporation and subsequently served as a principal with that company in San Jose, California until he successfully completed its acquisition and integration growth strategies in 2001, when he joined the Pepperdine faculty as visiting professor.

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