At Clinton Global Initiative, Profitability Gets Redefined

Short termism has been a frequent topic on this blog lately. On Day 2 of the ongoing Clinton Global Initiative (CGI), it emerged again at a panel called How to Strengthen Market-based Solutions. New York Times columnist Tom Friedman set an interesting course for the panel on the topic of sustainability.

The panel included the following participants, who represented a wide spectrum of ideas: Iqbal Qadir, the founder and director of the Legatum Center for Development and Entrepreneurship and a professor of practice at MIT; Robert E. Diamond Jr., the president and CEO designate of Barclays; Fadi Ghandour, the founder and CEO of Aramex International; Leila Janah, CEO and founder of Samasource; and Special Advisor to President Obama, Valerie Jarrett.

Friedman got the ball rolling by asking about factors that give bottom-up initiatives scalability and long-term sustainability. While you can view the entire panel on the CGI website, Ghandour and Janah’s perspectives seemed especially relevant to me.

Highlights:

How do you define profitability?

Ghandour, who heads Aramex, a Middle Eastern logistics and transportation provider, brought the very definition of profitability into question. “We have fallen into the trap of thinking of everything with a short term perspective. This came from the West unfortunately, from your country,” he said pointing to Friedman. “We need to think a little bit beyond the long term, not in terms of a quarter of a football game, but the entire season.”

Expanding on what he meant by long term profitability, Ghandour said, “If I am investing in the education of a community, which will equip them with knowledge and yield generational affluence in 20 years, is that return on investment for me? How do we define return on investment beyond financial returns, in terms of social impact and corporate responsibility?”

Prodded by Friedman, Ghandour explained, “For example, Aramex is an activist organization that is for profit and publicly traded. But we have decided that we want to run our company from a stakeholder perspective, which then begins to include community involvement, clinics, teaching volunteerism, scholarships, etc. Now we are told that this work is the work of an NGO. But we consider ourselves as part of civil society and this is our way of giving back because the community’s affluence gives us returns as a private company.”

He ended succinctly, “If the community is happy, the ROI will show on my company’s balance sheet, if not today, then down the line.”

Management 3.0: Getting comfortable with failure

Paradoxically, while Ghandour wanted to move away from bottom line considerations as the driving force for private enterprise, nonprofit founder Leila Janah emphasized their importance in her sector. “Dollars are the most convenient means of feedback we have today. If you are a private firm that did a terrible job, lost all your customers, you will go out of business. Unfortunately, that doesn’t happen in the nonprofit sector,” she said, adding, “Venture capitalists invested $20 billion last year in start-ups and 40% of them traditionally fail. But they are happy to invest in these companies because they know that 20 percent will become big successes and that will fund the next round of innovation. We need to get that comfortable with failure in the aid and social impact sector.”

Any takers?

http://blogs.forbes.com/csr/2010/09/23/at-clinton-global-initiative-profitabi…

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