Values-Based Leadership:

Wisdom Tradition Perspective

The Second International Conference on “Igniting the Genius Within”
Leading and Innovating through Turbulent Times
Indian School of Business,
Center for Leadership, Innovation and Change
Hyderabad, India
23 October 2009

Satish M. Thatte, Ph.D.

CEO, New Synergy Group
18 Crestview Drive
Kendall Park, NJ 08824, USA
smthatte@newsynergygroup.com
 Agenda
• Purpose of Business Enterprise
• Levels of Values
• Examples of Values from Wisdom Traditions
• Why Values-based Leadership?
• Values-based Leadership System
• Systems Thinking and Systems Dynamics
• Summary

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What is the Purpose of Business Enterprise?
Peter Drucker in The Essential Drucker (2001)
• Typical answer: To make or maximize profits
• This is not only false, but is irrelevant and may do harm
• Profits are crucial – for society even more than for the individual
business … profitability is not the purpose but a limiting factor. It is
not the cause or rationale of enterprise decisions … rather the test of its
validity.
• An enterprise cannot be justified as being good to business; but only as
being good for society
• It is not necessary for an enterprise to grow bigger, but it is necessary
that it constantly grows better
• There is a higher purpose for the business enterprise

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 Levels of Values
Values from Wisdom Traditions
Business Values
• Austerity, Frugality (Tapas): Honda
• Survival: Legal, Safe, • Accommodation (Kshanti): US Health Care
Profitable • Karma Yoga, and many more
• Relationship: Customer
satisfaction, open
communication
• Performance: Quality,
Efficiency, Productivity
• Participation: Equal
opportunities, Teamwork
• Ethics: Trust, Fairness Violation of Integrity Leads to Himsa (Harm)
Himsa cannot lead to Bahujan Hita or Sukha

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 Integrity (Arjavam)
• Your deliberate thoughts, words and actions must be congruent
• Only make commitments that you can keep; and act to keep them.
• Goes way beyond integrity in financial reporting (a legal requirement)
• Related values: Honesty, Authenticity, Transparency
Case Study 1: Your sales team has informed that your large telecom
customer will sign a contract which requires delivery of a ambitious wireless
software support system. Your software team is very nervous. As VP of
Engineering, what do you tell your CEO? As the CEO, what do you do?
Case Study 2: Your business associates from the far-east foreign
division always seem to agree with you. But the follow-up actions are not
consistent with your sense of the agreements reached. What do you do?
Case Study 3: You find it very dishonorable when you have to give
“commissions” to various “middle men” for securing business in certain
foreign countries. As a CEO, what do you do?
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 No Harm or Least Harm (Ahimsa)
• Yourself: Avoid workalcoholism or self-deprecation
• Customers: Provide safe, fair-priced products and services
• Employees: Provide good compensation; lay off rarely

• Co-workers: Wish & treat them well. No jealousy or backstabbing

• Suppliers and Partners: Long-term win-win relationship
• Environment: Sustainable products and processes
• Competitors: Compete fairly; no FUD, predatory pricing, etc.
Case Study: You are a toy manufacturer. Your major customer (a giant
retail chain) has told you to cut prices by 50% or else. What do you do?
Outsource to China? What other options will you explore?
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 May it benefit the most. May the majority be happy.
• FoEs must have sound
• Firms of Endearment (FoE): Harness management practices as the
multiple stakeholders’ highly interdependent starting point before they try to
interests (Society, Partners, Investors, endear all stake holders
Customers and Employees, Government, etc.) • FoEs that endear all their
stakeholders also are enduring
• Higher purpose transcends profit
maximization Amazon, BMW, Carmax, Caterpillar, 
• FoEs led by spiritually evolved, servant Commerce Bank, Container 
leaders. Store, Costco,  eBay, Google, 
Harley‐Davidson, Honda, Ideo, 
• FoEs outperformed S&P 500 over 10
IKEA, JetBlue, Johnson & 
years by 10x, outperformed GtG by 3x Johnson, Jordan’s Furniture, LL 
• Conscious Capitalism movement Bean, New Balance, Patagonia, 
• Catalyzing Conscious Capitalism Conference, Oct 2009, REI, Southwest, Starbucks, 
Austin, TX Timberland, Toyota, Trader 
Joe’s, UPS, Wegman’s,  Whole 
Foods
Bahujan Hitay, Corporate Sukhay
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 Drivers for Bahujan Hitay – Corporate Sukhay
(adapted from “Firms of Endearment” by Raj Sisodia, et al)
Values Examples
Integrity : Authenticity, Sharing of financials with employees of private companies: New
Transparency (Arjavam) Balance, Patagonia
Do no or least harm (Ahimsa) Google: Do no evil. Southwest: Avoid layoffs even in toughest times

Endear Society
Endear Partners
Endear Investors
Endear Customers
Endear Employees
Patagonia uses only renewable energy through wind power; IKEA uses
uniformly high environmental and safety standards worldwide, even
when local regulations are less demanding.
Harley-Davidson has an agreement with US dealers not to sell more
30% of its bikes overseas if domestic demand is not met
For FoEs profits ensue and are not pursued as an end in itself; Results
are 9x superior to S&P 500 over 10 year period!
LL Bean, CostCo customers have blanket permission to return products
Wegmans paid $54M in scholarships to 17,000 employees (annual turn-
over rate is only 6%); CostCo employees are handsomely paid
(compared to Sam’s Club), generate more revenues & profits/employee

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 Why Develop an Enterprise based on
Values from Wisdom Traditions?
• Easy to understand and enduring; rooted in Dharma (righteous
behavior that sustains the world order)
• Universal and eternal applicability (Tested for 5,000 years):
• For personal and professional lives
• Decision making is neutral wrt. language, race, culture, geography
• Decision making processes scale up
• Guiding lights in these turbulent and volatile times when it is
almost impossible to make rules for every situation explicitly
• Hard to copy – creates sustainable competitive advantage for you

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 Values-based Leadership System
Principles
Change must start at the top
Reciprocity
Go beyond “Bounded
rationality”
Holistic systems thinking
Stakeholder trade-offs are
cop-outs
Deeply internalized values
Integrity in the value system
itself
Practices
CEO must be the Chief Transformation Officer
Treat others as you want others to treat you
Learn to see the consequence beyond immediate space
and time; change the reward system for long-term
Harmonize interests of all stakeholders ;
Apply systems thinking and systems dynamics tools
Think hard and synergistically; Share the increasing
wealth (financial, social, emotional, holistic)
Develop a learning organization (with systems
thinking); Reduce feedback delay loops
On-going monitoring of the value system itself

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Systems Thinking and Systems Dynamics
Wealth Creation

• Profit is a fixed pie, but can be a

growing pie
• Social, Emotional and Holistic
wealths are not subject to zero-
sum game; moreover, they may
not diminish when shared!
• Profits may be subject to limits
of growth archetype, but other
wealth types may not be!

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 But, But, But …(ValueButts)
Concern
You guys are naïve… may be it
applies in personal lives… but
business world is tough
But my competitors are nasty…
they don’t live by these values
But I have to worry about the
bottom line… not just feel good
theories
Ok.. Maybe there is something
here. But this is hard… how do
I do it?
But, But, But…
23-Oct-09
Response
Extreme greed, lack of transparency, poor regulations,
moral hazards led to the $nT financial meltdown, and a
deep recession…. Do you need a stronger wake-up call?
Compete fairly; tit-for-tat nastiness only escalates and
bloodies everyone
FoEs outperformed S&P 500 over 10 years by 9x,
outperformed GtG by 3x. You can have your cake and eat
it too !
CEO must institute value-based leadership system;
inculcate systems thinking and cultivate a learning
organization; Join the Conscious Capitalism movement
(not a call for going back to socialism)
Learn, Explore, Must have commitment from the top
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 Summary
• Purpose of Business Enterprise by Peter Drucker
• Integrity (arjavam) Æ Least Harm (ahimsa) Æ May it
benefit the most. May the majority be happy. (Bahujan-
Hitay, Corporate Sukhay)
• Examples of Firms of Endearment
• Reasons for Values-based Leadership and Organization
• Values-based Leadership System: Principles and Practices
• Application of Systems Thinking and Systems Dynamics
• Address common concerns, fears and ValueButts (apply
values only when convenient)

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 References Contact
1. “The Essential Drucker” Peter Drucker,
Harper-Collins Business, 2001
2.“Firms of Endearment” Raj Sisodia, Frank
Wolfe, Jagdish Seth, Wharton Press, 2007
• www.firmsofendearment.com Satish M. Thatte, Ph.D.
3.“Conscious Business: How to Build Value • CEO, New Synergy Group
Through Values” by Fred Kofman, Sounds
True, 2006 • 18 Crestview Drive
4.“Thinking in Systems” Donella Meadows, • Kendall Park, NJ 08824
Chelsea Green Publishing, 2008
5.“Leading with Purpose: The New Corporate • USA
Realities” by Richard Ellsworth, Stanford • smthatte@newsynergygroup.com
Business Books, 2002
6.Conscious Capitalism movement
• www.consciouscapitalism.com

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