There are five forms of wealth, capital, that form a circle of wealth generation. These are Spiritual Capital, Social Capital, Human Capital, Innovation Capital and Financial Capital. Each section of this course provides an understanding of each form of wealth and presents a self-assessment and action planning model.
Following this path will generate wealth in your business and in your personal life.
Stephen Covey wrote that “If you want to make minor, incremental changes and improvements, work on practices, behavior or attitudes. But if you want to make significant, quantum improvements, work on paradigms.” In Sustainable Wealth I am proposing a paradigm shift in how we personally pursue wealth and how our corporations create strategy to enhance the creation of value for their shareholders, employees, and society.
Money is not in the beginning. The word, the creative spirit, purpose and values, are in the beginning. The cycle of wealth begins with a creative act of leadership that inspires unity of energy and effort. The ideas, the creative spirit, purpose and values - spiritual capital - come first. This then generates the wealth of social and human capital that stimulates innovation capital and finally results in financial capital. If not managed properly, it ends with decaying financial capital piled onto a failed moral scrap heap; an empty shell consumed by material illusions of wealth.
To the degree that an organization can enable, support, or encourage a depth of personal morality and dedication to a noble purpose, it possesses spiritual capital. I sincerely believe that this form of wealth accrues both to the organization and to the individual. It will interact and support every other form of capital and ultimately will have its effect on the financial bottom line. In many ways it is the first cause.
The pursuit of worthy purpose is the primary means of achieving energy in an organization. Human beings are energized by, and will sacrifice for, that which they believe to be noble and therefore ennobling of them. Leaders create energy that may later be directed by managers, but absent the energy that comes from a worthy purpose, there is little motion. Any manager who believes that only technical processes, skills, or financial capital are required for competitive success is much like the racing team that spends a million dollars for the latest racecar but then hires a driver who doesn’t care about winning. Purpose matters. Ennobling purpose matters most.
Shared values are the basis for trustworthy relationships and sociability. Belief systems have enormous impact on the culture of organizations, and it is the function of leaders to exert efforts to intentionally shape these beliefs. A common set of values is the lubricant of fluid associations. It is the basis of unified action and trustworthy behavior.
Social Capital is the value of trust. The degree of trust you engender in others will determine the likelihood of being hired, customers purchasing your products or services, or, employees working, even sacrificing for your company. It defines the likelihood that others will engage you in solving problems. It is a key to the effectiveness of all teams, families or communities. It determines brand equity and market capital. Entrepreneurs often begin their business within a small circle of trust and gradually expand the radius of trust, increasing the scope of their network and their business.
To analyze the current state of social capital and plan the future, it is important to drill down to a more functional level. There are two types of social capital that may be assessed: internal sociability or trust, and external relationships or brand equity.
Internal social capital is the level of trust within the organization. Trust operates both horizontally and vertically within the organization and is critical to the ability to solve problems, innovate, and satisfy customers.
Internal sociability may have the most significant impact on the ability to solve problems. All organizations are a continual stew of problem solving. Whether it is solving the problems presented by a customer, a new technology, or a competitor, business is a game of constant adaptation to a changing environment. The apparently small act of walking down the hall to an associate’s office and sharing a problem, casually brainstorming without regard to who gets credit, or who bears what responsibility, is the most frequent, and probably the most effective way to solve problems. These encounters may escalate into a formal meeting or problem solving process. Whether the interaction remains highly informal or becomes more formal, the critical ingredient is the simple willingness to be engaged, to care about the problem, to listen deeply, think together, and brainstorm solutions.
External brand equity is the recognition and respect given to your firm by the market place. Just as the quality of an individual’s life is largely determined by the quality of their social relationships, the same may be said of a company. The value of a company is directly related to its brand equity.
Human capital is the sum of all of the competencies and motivation of the people within the organization. Human capital has always been a critical component of the performance of any business, but today’s entrepreneur is likely to bring with him, not money, but competency and motivation, the two key ingredients of human capital.
Motivation has been the subject of hundreds, if not thousands of books for managers. When all is said and done, the keys to motivation are relatively simple: work that is interesting and ennobling; sincere recognition by peers and superiors, opportunities for career advancement, positive feedback that can guide performance, strong and supportive social interaction by a team, and, oh, did I forget? – fair and attractive financial rewards. There is little reason to waste time in the endless debates about which is more important: money, recognition, or enriching work. They are all motivating and different personalities are more or less influenced by different types of incentives. The job of designing an organizational system is to optimize all of the various forms of motivation. Over-reliance on any one form is a prescription for poor performance.
Human competence is the only modern parallel to production technology of the past century. Modern production most often occurs in the mind, or the collective mind of a small work group. If you have highly trained marketing professionals, skilled sales men and women, great engineers and brilliant financial managers, you have an important form of capital. These competencies are a foundation of performance. Investment in these assets is likely to pay off in the creation of other classes of assets.
Those organizations that have exhibited the greatest dedication to the development of human competence have consistently outperformed those who have only given lip service to training and development. General Electric, Microsoft, Toyota and other companies that have grown into great economic powers have done so as a result of both attracting and developing the most competent people.
Innovation grows in the soil of spiritual, social, and human capital. To the degree to which there is commitment to a worthy purpose, spiritual capital, members of the organization will engage in the discretionary effort of thinking, exercising their brain on a problem or opportunity. Many creative ideas occur on the weekend or in the evenings, when a member of your team is choosing, even unconsciously, to think about a problem at work or a customer’s needs. This is discretionary effort, effort that cannot be forced, measured, or required. It only occurs when employees genuinely care about the success of the organization.
Innovation thrives in an environment of high trust, social capital. Most innovations are not the product of one person thinking alone. Rather they are the result of thinking together, sharing ideas, brainstorming and allowing your idea to be criticized by your associates. High trust cultures, in the larger economy and in companies, are high innovation cultures. If you examine low trust cultures, such as in the Middle East, you will find very low rates of innovation. Companies in which there is a culture of fear, rather than a culture that celebrates successes, will have low rates of innovation.
The degree of competence, the continual education of employees, lays the foundation for high innovation. When an individual is continually seeking the latest knowledge, the latest experiments, the latest inventions or theories, his or her mind is playing in the intellectual waters in which innovations float to the top.
The success of Honda and Toyota over U.S. automobile companies was the result of their fanatic dedication to process, manufacturing and product or technology innovation. The success of Wal-Mart, Home Depot, L. L. Bean or McDonald’s is all about process innovation in their industries. Processes either create or minimize cost. They assure either consistency and reliability or the unfortunate alternative. Like other forms of capital, the quality of the work process and technological innovations that create an advantage for customers is a significant asset.
Innovations may be one of four types or a combination of types: They may be innovations in a product delivered to customers, or they may be innovations in process, how they are delivered or produced. Either product or process innovations may be small incremental improvements; or they may be large game changing breakthroughs. The way each of these is encouraged is different.
Financial wealth is the natural result of the pursuit of the previous four forms of capital. Most people who make a great deal of money do so, not because they were pursuing money, but because they were passionate about their innovation and their service to their customers.
Financial capital is in two forms: Positive Cash Flow and a Postivie Financial Balance Sheet. In your personal life you may feel wealthy if your income exceeds your expenses, at almost any level. If you make one million dollars a year, yet you are spending one point two million, you will feel poor. Part of the "trick" of wealth is to manage the relationship between income, expectations and expenditures.
In this course I will not provide specific financial advice because I do not know the cirumstances of any student. I will merely provide some general principles.
This section introduces the five forms of wealth and their components. I have attached a Parable - In Searc of the Golden Door. This is intended to be a story to prompt discussion about the meaning of wealth and its achievement. It will be part of my forthcoming book.
The five forms of capital can be applied to either one's personal life or to the life of a business. This lectures describes the applicaton of those forms of capital to a business and the develop of assets through the life cycle of a business.
Self-development is a discipline of practice, learning by doing, that has four stages: Discover, Dream, Design, and Do it and Develop. We will apply each of these action steps to each form of capital.
The First Circle is to be wealthy in spirit: to pursue a worthy purpose that excites your heart and the hearts of others. This is the first act of leadership that unites the energy and effort of others toward common purpose. It is the Word that is in the beginning.
Elements of Spiritual Capital
Values for the 21st Century Entrepreneur
1.Honesty: the Foundation of All Virtues
2.The Spirit of Service
3.Justice: The Trainer of The World
4.Consultation: Decision-making in the Knowledge World
5.Unity: The Circle of Commitment
6.Moderation: Abolish Extremes of Wealth and Poverty
7.World Citizenship: The Field of Action
8.Universal Education: Building Social Capital
This lecture establishes a pattern of self-assessment, discoverying your current state, and then action planning how you can develop this form of wealth. The attached assessment and action planning guide should be downloaded for use when watching this lecture.
This lecture presents a couple personal stories of how social capital lead to wealth creation in my own life.
“One of the most important lessons we can learn from an examination of economic life is that a nation’s well-being, as well as its ability to compete, is conditioned by a single, pervasive cultural characteristic: the level of trust inherent in the society.” Francis Fukuyama
“Social Capital a set of informal values or norms shared among members of a group that permits cooperation among them. If members of the group come to expect that others will behave reliably and honestly, then they will come to trust one another. Trust is like a lubricant that makes the running of any group or organization more efficient.”
Elements of Social Capital
Keys to building your personal brand:
No strategy can be successfully executed absent the necessary skills, knowledge and motivation. A strategy without a plan to align human capital is only strategic wishing, not strategic planning.
This lecture describes the basic elements of human capital and why, in the information age, continual learning is essential.
In this lecture you will learn about social, technical and financial skills that contribute to business success. You will assess the "landscape", the forces in the environment that will affect what skills you will need in the future and develop an action plan to build those skills.
Everyone struggles with their own motivation and self-management of their own behavior. This lecture presents a simple and reliable model for managing your own behavior.
No writer, hopefully, is so foolish as to say “Here is a sure shot guaranteed formula for achieving riches.”It is true that a lot of books and programs are marketed to the gullible with just such claims. But, there are probabilities. It is more likely that we will be more successful if we get a high school diploma, then a college degree, then a graduate degree. We are more likely to get the job if we show up for the interview wearing a nice suit and a tie. But we never know. We play the probabilities, and more often than not, we are right in doing so.
If you have read this far you already know my prescription for success, both for individuals and for companies. It is no sure shot easy-does-it guaranteed stomach flattening sex life enhancing formula for riches. I would rather believe that it is a formula for facing the hard realities of the world as it actually is.
My advice for gaining personal material wealth (no guarantees):
One: Develop your inner self; search your soul, for a worthy purpose, one that will be motivating to you, to your family. Meditate about it. Pray about it. That purpose must be beyond you. It must be worthy to and for others. Then the Great Spirit will be with you.
Second: If you don’t already have one, you must develop an absolute sense of right and wrong, a value system that will cause others to trust you over the long term. Work only for a company that also displays a clear purpose and value system.
Third: Build trust. Expand your circle, your radius of trust. The more people trust you, respect you, and like you, the wealthier you will become. Build your own “brand equity.”
Fourth: Learn, learn and learn. Then practice. Lean some more. This is the age in which human competence is money. Of course, there is no one-to-one guaranteed translation, but over time you can count on the more competent in any field earning more money. You, and only you, own the responsibility for your own competence. You can’t blame anyone or expect anyone else to take care of your competence. Become the “world’s greatest expert” in whatever you do.
Fifth: Motivate yourself. Again, it is no one else’s job. Constantly set goals for your growth and development and for visual achievements. Reward yourself. Be your own behavior manager, creating antecedent stimulus events to elicit behavior that leads toward goals, and positively reinforce your own behavior. You are the mice in the maze and you control the cheese.
Sixth: Innovate. Constantly seek improved ways to do things, no matter what you do. If you collect garbage, study the truck routes, study the equipment, study the motions workers go through, eliminate waste, speed cycle times, measure, graph, set goals, find better ways. If you can do that collecting garbage you can do that doing whatever you do. Let people know about your innovations. Teach them to others. Write them up in a case study. Maybe they are so significant you could form a company just based on those innovations.
Seventh: Work harder than anyone else. This is the bad news. Generally, those who work harder, study harder, contribute more to the success of the organization, end up making more money. I know it is frustrating. And, yes, I know some people just win the lottery even though they are lazy bums. But, if you’ve read this far, you aren’t counting on that.
Eighth: Don’t confuse spending with success or wealth. Remember, Warren Buffet lived in the same old house in Omaha well into many billions of net worth. It is easy to spend money. But building long term sustainable assets is not so easy and has little to do with the car you drive or the size of your home.
Ninth: Take breaks; don’t stop. So, you are looking forward to retirement when you can lay back, play golf, go sailing and be a bum? Forget about it. First of all, our expectations about retirement are based on a fifty year old idea developed around the time that social security was created that defined the retirement age as sometime around sixty-five. That idea was created when our life expectancy was around sixty-five to seventy. Therefore, Social Security was no problem. But now, you will live to be ninety! Maybe longer. You are going to quit being productive and earning money when you have another twenty five or thirty years to go? Don’t be ridiculous. People who are productive, learning, contributing and earning are happier than those who aren’t. Don’t plan on making yourself miserable.
If you do these things, there is a very high probability (that’s the game we play, remember) that you will be healthy, wealthy and wise.
Each of the above steps can be translated or applied on the level of the organization. Strategic planning is planning for continuous improvement on the scale of the organization and over the long term. Of course financial resources must be reinvested in plant and equipment and other material components of the organization’s process. But, at least fifty percent of the value added by any organization today is added by the people. Maintaining that value requires investment. All innovation comes from the minds and motivation of people. And while the investment in human capital does require investment of funds in training and development, spiritual and social capital require little financial investment. Rather, they require investment in the behavior and actions of leaders. This may be the hardest thing of all.
How do you decide to reinvest in social, spiritual and human capital? I suggest that the management teams, at several levels of the organization, complete the self audits in each of the previous chapters.Then add them up, and have a planning session in which you review the results, brainstorm alternatives for enhancing the areas in which you need to improve, and reach consensus on actions to invest (not necessarily money) in each form of capital.
Everyone wants to be a millionaire, or is it billionaire now? But will you really be happy if you have a million or a billion? Will you be happy if your financial wealth exceeds your spiritual or social wealth?
There is research that answers this question. It says that if you make millions, you will not be any happier than someone who has very modest wealth. The pursuit of millions to achieve happiness is the pursuit of illusions.
The case can be made that happiness is found in fulfilling one’s purpose. Martin E.P. Seligman has studied mental health, what he calls positive psychology, as opposed to the more usual topic of psychologists, mental illness. Seligman presents the common sense hypothesis that more people are likely to achieve a healthy psychological condition by pursuing health and happiness, rather than continually seeking a solution to their problems. He has conducted an exhaustive study of happiness and arrived at a description of the conditions leading to what he calls authentic happiness. Authentic happiness is distinct from temporary pleasure and is much more than the sum of continuous pleasurable events. In other words, if money, candy, sex or other pleasure inducing events were all that was required for happiness, then the person who could acquire the most of these pleasures would be happiest. The data says otherwise. The extremely rich are no happier than those who are just moderately well off. Easy access to sex or candy or any other instant pleasure does not cause one to be “authentically happy” – happy with oneself and one’s life.
Seligman says, “The belief that we can rely on shortcuts to happiness, joy, rapture, comfort and ecstasy, rather than be entitled to these feelings by the exercise of personal strengths and virtues, leads to legions of people, who in the middle of great wealth, are starving spiritually. Positive emotion alienated from the exercise of character leads to emptiness, to in-authenticity, to depression, and, as we age, to the gnawing realization that we are fidgeting until we die.” On the other hand, his research found that “The positive feelings that arise from the exercise of our strengths and virtues, rather than from the shortcuts, is authentic.” “Authentic happiness comes from identifying and cultivating your most fundamental strengths and using them every day in work, love, play and parenting.”
What you believe about the nature of community is also an important indicator of both success and happiness. Studies of authentic happiness have indicated that a strong social network is one of the highest causal factors. Those who live in the middle of a block of houses have a stronger social network, and report that they are happier than those who live at the end of the block.How many times have you heard people say “it’s all in who you know?” Well, there is a lot of truth in that.
Our culture has conditioned us to seek ease. Every advertisement of the vacationer laying on the lounge chair on the beach, beer in hand, beautiful bodies in abundance and free from care, seduces us to seek leisure. We want the most comfortable car, the most comfortable house, the safest neighborhood, the safest retirement fund, and every labor saving device that responds with a click of a remote control. But do these things lead to either happiness or the deep satisfaction of knowing that we are growing and developing? No, they are only those immediate pleasures that we confuse with authentic happiness.
The ability to create unity of our material, spiritual, social and intellectual selves is like the harmonious pleasure of a well played melody. This is the sacred hoop, the unity of the five circles of wealth.
For the past forty years Lawrence M. Miller has worked to improve the performance of organizations and the skills of their leaders. His expertise is derived from hands on experience creating change in the culture of hundreds of organizations.
He began his work in youth prisons after recognizing that the learning system in the organization had exactly the opposite of its intended effect – increasing, rather than decreasing, dysfunctional behavior. For four years he worked to redesign the prison system by establishing the first free-economy behind prison walls, where each inmate had to pay rent, maintain a checking account, and pay for everything he desired. This was his first application of organizational transformation.
He has been consulting, writing and speaking about business organization and culture since 1973. After ten years with another consulting firm, he formed his own firm, the Miller Howard Consulting Group in 1983. In 1998 he sold his firm to Towers Perrin, an international human resource consulting firm and became a Principal of that firm. In 1999 he left that firm to focus on solo consulting projects.
He and his firm were one of the early proponents of team-based management and worked with many clients to implement Team Management from the senior executive team to include every level and every employee in the organization. The Team Management process created a company of business managers, with every employee focused on continuous improvement of business performance. In addition to directing the overall change process, Mr. Miller personally coached the senior management team of many of his clients.
The implementation of Team Management led to the realization that the whole-system of the organization needed to be redesigned to create alignment so all systems, structure, skills, style and symbols support the same goals and culture. From this realization he developed the process of Whole System Architecture that is a high involvement method of rethinking all of the systems, structures and culture of the organization. Among his consulting clients have been 3M, Corning, Shell Oil Company, Amoco and Texaco, Shell Chemicals, Air Canada and Varig Airlines, Eastman Chemicals, Xerox, Harris Corporation, McDonald's and Chick-fil-A, Merck and Upjohn Pharmaceuticals, United Technologies, Metropolitan Life and Landmark Communications.
Mr. Miller has authored ten books, among them American Spirit: Visions of A New Corporate Culture, which was the text for Honda of America's course on their values and culture; and Barbarians to Bureaucrats: Corporate Life Cycle Strategies, which draws on the history of the rise and fall of civilizations to illustrate the patterns of leadership and evolution in corporate cultures. Most recently he authored Getting to Lean – Transformational Change Management that draws on the best change management practices such as socio-technical system design, appreciative inquiry, and systems thinking or learning organizations to provide a road map to transforming organizations. He has also authored Team Kata - Your Guide to Becoming A High Performing Team, the core human process of lean organizations. Most recently he published The Lean Coach that corresponds to his course on Coaching Leaders for Success. He has appeared on the Today Show, CNN, made numerous appearances on CNBC, has written for The New York Times and been the subject of a feature story in Industry Week magazine.