For Cemex, operating by institutional logic and considering unmet societal needs produced innovations such as antibacterial concrete, which is particularly important for hospitals and farms; water-resistant concrete, useful in flood-prone areas; and road surface material derived from old tires, desirable in countries that are building roads rapidly. An idea from Egypt for saltwater-resistant concrete, helpful for harbor and marine applications, became a product launched in the Philippines. This is positive because it feeds innovation and cultural sensitivity to the markets the company serves. A logic that justifies treating employees as self-determining volunteers—in essence, as true professionals who care about high performance because they believe in the company as institution—makes it important to have a motivating purpose and values to provide coherence and common identity. I say convenient because this lopsided logic forces companies to blank out the fact that they command enormous resources that influence the world for better or worse and that their strategies shape the lives of the employees, partners, and consumers on whom they depend. Nutrition, environmental responsibility, and talent retention are pillars supporting the slogan. Especially for great global companies, institution building is not the result of carrying out specific activities but a coherent, holistic pursuit in which elements reinforce one another, are inextricably intertwined, and reflect a logic and leadership style that permeate the corporation.
They invest in the future while being aware of the need to build people and society. Institutional logic should be aligned with economic logic but need not be subordinate to it. However, this type of property has fallen into the private and social sectors over time, where it was less concentrated wealth came to check the top of the stack and social ideas of shareholder capitalism. Rather than viewing organizational processes as ways of extracting more economic value, great companies create frameworks that use societal value and human values as decision-making criteria. Emotional Engagement The transmission of institutional values can evoke positive emotions, stimulate motivation, and propel self-regulation or peer regulation.
If values are clear and well understood, they can be appealing to employees. Establishing clear institutional values can help resolve this complex issue. Institutional logic holds that companies are more than instruments for generating money; they are also vehicles for accomplishing societal purposes and for providing meaningful livelihoods for those who work in them. They negotiated an agreement with the Chohung union, deferring formal integration for three years, giving equal representation to both Shinhan and Chohung managers on a new management committee, and increasing the salary of Chohung employees to match the higher wages of Shinhan employees. Strategic Management How Great Companies Think Differently Making money has long been the ultimate aim of a business. Companies using institutional logic are often willing to invest in the human side of the organization—investments that cannot be justified by immediate financial returns but that help create sustainable institutions.
Laying the groundwork of social responsibility can reciprocally develop a sustained corporation. The Houghton family established Corning Glass and the town of Corning, New York, for instance. This is done through being more socially conscious and planning for better quality of life for employees including a healthy work life balance, and to provide a meaningful life purpose for workers that build people and society. In the mobile Laundromats, managers and other professionals washed and folded clothes for local people, getting to know them and their circumstances. In companies that adhere to an institutional logic, executives cultivate relationships with public officials neither as a quid pro quo nor to push through particular deals.
Whereas the aim of financial logic is to maximize the returns on capital, be it shareholder or owner value, the thrust of institutional logic is to balance public interest with financial returns. How- ever, at great companies profit is not the sole end; rather, it is a way of ensuring that returns will continue. Novartis employees serve in hospitals, where they see firsthand the challenges of disease and how their drugs are used. Self-organizing communities can be a potent force for change, propelling companies in directions they might not have taken otherwise. Affirming purpose and values through service is a regular part of how great companies express their identities. Community building is not a hard sell for people native to an area or for long-term residents; there is an emotional pull of place that makes such work desirable. Neither you, nor the coeditors you shared it with will be able to recover it again.
Matrix organizations—in which individuals report to two or more bosses depending on the different dimensions of their tasks—become what I dub a matrix on steroids. For example, Andrew Carnegie holder Iron and Steel Company of Pittsburgh and Carnegie Hall performance Carnegie Art Centre. Fully understanding a company requires knowledge of its social structure and informal networks, and optimizing performance requires social investments. Everyone in life has different views of the world because of their experiences and beliefs. These people will tend to view society as if everyone did not come from the same family but different places and everyone is categorized. Even, the competitive parity is not desired position, but the company should not lose its valuable resources, even they are common. A Long-Term Focus Thinking of the firm as a social institution generates a long-term perspective that can justify any short-term financial sacrifices required to achieve the corporate purpose and to endure over time.
According to this school of thought, the value that a company creates should be measured not just in terms of short-term profits or paychecks but also in terms of how it sustains the conditions that allow it to flourish over time. Institutional logic holds that companies are more than instruments for generating money; they are also vehicles for accomplishing societal purposes and for providing meaningful livelihoods for those who work in them. Seems so foolish but it is…and even I have sum or the other weakness. Neither you, nor the coeditors you shared it with will be able to recover it again. It guides a quest to reduce or eliminate sugar and sodium in foods and beverages. Global mergers and acquisitions add further complexity, with their success resting on how effectively the organizations are integrated. I believe that institutional logic should take its place alongside economic or financial logic as a guiding principle in research, analysis, education, policy, and managerial decision making.
Therefore, it is necessary to block the new entrants in the industry. These kinds of interactions express corporate values and produce valuable learning, too. In developing an institutional perspective, corporate leaders internalize what economists have usually regarded as externalities and define a firm around its purpose and values. Instead, employees make their own choices about which ideas to surface, how much effort to put into them, and where they might contribute beyond their day jobs. Listening to the interests of employees and possibly offering opportunities to pursue those under a sort of corporate sponsorship.
Great companies see business as a primary pillar of society. In this article, I turn the spotlight on this very different logic—a social or institutional logic—which lies behind the practices of many widely admired, high- performing, and enduring companies. Inflation and unemployment rates were at an all-time high and it was hard to see anything getting better again. When leaders come to see themselves as having societal purpose, they can choose to get involved at local, national, and even global levels. She insists that firms that focus on the long-term are sustainable institutions with deep and long-lasting roots. It is said that case should be read two times.
He had a desire to see both nations thrive and believed that his role in a global company afforded him a unique perspective. Moreover, seeking legitimacy or public approval by aligning corporate objectives with social values has become a business imperative. They felt that they had an obligation to improve the lives of consumers who could not afford premium products. Instead of being mere money-generating machines, they combine financial and social logic to build enduring success. In the following pages, I will describe six ways in which great companies use institutional logic, how it gives them an advantage, and how the perspective can radically change leadership and corporate behavior. The appointment of a global head of health and a commitment to eliminate sodium and sugar from the diet was a key driver for this project. They are more likely to treat employees as self-determining professionals who coordinate and integrate activities by self-organizing and generating new ideas.