Every company benefits from an educated populace. Every company needs skilled labor. Every company needs infrastructure – roads, bridges, ports – and every company benefits from the new technologies made possible by basic scientific research. In short, every company benefits from “the commons,” the set of communal resources that allow firms and workers to be productive.
In America post-World War II, corporations collaborated with government to ensure continued investment in this commons, recognizing that without it their own competitiveness would suffer. As historian Geoffrey Jones has written, the post-war period was good to American firms, and they, in turn, reinvested in their communities:
During the 1950s General Electric invested heavily in social programs in local communities, and in education, encouraged by new laws which made corporate giving to charities tax deductible. A new generation of firms established foundations, and firms also invested in higher education in particular directly. Alfred
and other business leaders worked on the Council on Financial Aid to education to encourage firms to give to universities. During the 1960s some American firms ramped up their corporate philanthropy further. The Minneapolis-based Dayton Hudson became noteworthy for giving away 5 per cent of its pre-tax profits to philanthropy.
Starting around 1980, however, shifts in technology, geopolitics, and governance changed the game. It became possible in some sectors to do business from anywhere, and large firms became globally mobile. With new forms of automation, companies could do more with fewer workers. The ensuing waves of globalization and technological progress brought great benefits to American firms and consumers.
But these trends also had more negative consequences, as Jan Rivkin and Michael Porter have argued in their work as co-chairs of Harvard Business School’s U.S. Competitiveness Project. First, these trends weakened the connections between companies and their communities. Second, workers — especially those in the middle of the skills spectrum — suddenly found themselves competing for jobs against hundreds of millions of ambitious workers around the world, and against technology improving at the rate of Moore’s Law. Third, because individuals with unique skills — from celebrities and sport stars to entrepreneurs, investors, and consultants — could now sell their services on a global scale, inequality soared.
Throughout this period, America systematically underinvested in the common resources that underpin shared prosperity. That needs to change.
Business has a key role to play in restoring America’s commons, but of course it can’t do so alone. These resources are in large part the domain of government, of educational institutions, and other community organizations. If companies want to invest in the common resources that ensure their success — and they should — they need to learn to effectively collaborate across sectors.
Every city or region has a unique set of challenges that plague its commons — gaps that need filling so that the local economy can run on all cylinders. Our research, and the research of several of our colleagues at HBS, has focused primarily on the subset of challenges that the business community can and should play a major role in addressing. We see business as an important force in addressing parts of the commons that drive the economy, particularly in areas such as workforce skills, infrastructure, supplier networks, and ecosystems of entrepreneurship and innovation.
The good news is that experiments in all these areas are already underway at the local level. In cities and metros across the United States, leadership from government, business, labor, education, and the nonprofit sector have started to work together across sectors to bolster the commons. These cross-sector collaborations are diverse in nature, and often are responses to specific local conditions. Furthermore, they are pushing the boundaries of traditional public-private partnerships: the engagements are driven neither by civic duty or short-term transactional benefit, like they often were in the past. Instead, businesses see them as in their longer-term strategic interests.
Here are some examples:
- In North Carolina, Siemens Corporation is collaborating with Central Piedmont Community College to provide students with the training necessary to thrive at the company upon graduation.
- In Massachusetts, the Massachusetts Life Science Center combines the resources and convening power of government with the expertise of local universities, businesses, and private investors to bolster innovation and entrepreneurship in the region’s life sciences sector.
- In Salt Lake County, Utah, the local government is expanding high-quality Pre-K programs in the area through a pay-for-success contract with local nonprofits, educators, and private investors.
- In the Minneapolis-St. Paul region, business and civic leaders involved with the Itasca Project are combining their resources and influence to address regional deficiencies in infrastructure, higher education, and the business environment.
Our work has identified four types of collaborations that have been forming across the country to link business with government and civic groups to solve pressing social problems.
The first is direct partnerships. This traditional approach entails a business, or perhaps even a private foundation, targeting a specific area for investment, and working with other organizations to deliver improved outcomes in that area. The collaboration between Siemens and Central Piedmont Community College, aimed at skill development, is one example. Another is Goldman Sachs’ 10,000 Small Businesses Financing Initiative, which provides training and access to capital to small business owners through a partnership with a network of community development financial institutions. When business does participate in these partnerships, it does so strategically – with a careful understanding of how the collaboration will benefit both itself and its cross-sector partner.
A second approach uses innovative funding models and new sources of capital to solve some of society’s most difficult problems. Examples include pay-for-success contracts that use debt provided by the private sector to help governments expand social programs, as well as program related investments (PRIs) from philanthropies. Many of these innovative funding models fall under the larger “impact investing” movement.
Third, a “committee” approach gathers a diverse set of influential leaders, often from business, government, education, and philanthropy to focus on cross-sector issues and collaborate on possible solutions. These collaborations might include city or statewide councils on competitiveness and economic growth, civic alliances, and local, CEO-membership organizations. Minnesota’s Itasca Project is an excellent example of this approach. Committees like the Itasca Project provide creditability to efforts seeking to address issues related to the commons and focus valuable resources and attention on those issues.
One last approach has gained steam over the past few years. Networks with a “backbone” organization consist of a group of committed and influential actors and organizations making a long-term commitment to a common agenda. The consortium provides funding and other resources to maintain a staff and dedicated backbone support that focuses exclusively on the goals of the group. Some examples include “Collective Impact” initiatives and industry cluster organizations such as the Massachusetts Life Sciences Center. The power of these efforts is derived from their ability to coordinate a variety of organizations and sectors to attack an issue from different angles, resulting in a higher likelihood of success, especially for those issues that don’t fit nicely into a single sector.
Taking these four types of collaborations, and crossing them with the areas in which we think business has a role to play, we can chart the possible ways that business leadership can engage in cross-sector partnerships:
This grid helps make sense of a diverse and seemingly unrelated list of innovative corporate partnerships, all of which in some way are helping to rebuild the commons. While all such projects need to be tailored somewhat to local conditions, they don’t all need to start from scratch. This grid offers a set of models for forward-thinking companies committed to investing in the prosperity of their communities.
Of course, even when the structure is done right, cross-sector collaborations still sometimes fail. In our research we have identified three things that successful partnerships get right.
First, they find the right leaders. These are people who are influential within both their organization and their sector; who have an ability to see the big picture and think about long-term risks; and who have a connection to and a stake in the success of the local area. Without such leaders, cross-sector collaborations are unlikely to make a difference.
Second, successful partnerships are able to find a common agenda amid a diverse set of perspectives. While complete agreement is unrealistic, such initiatives are able to zero in on the values and goals shared by companies, unions, local officials, the public, etc.
Third, successful partnerships define the desired outcomes ahead of time, measure their progress, and are transparent about how they’re doing. Sometimes this even takes the form of third-party audits.
Collaboration between business, government, and civic groups is difficult, messy work, and it’s easy to see it as a distraction from a company’s day-to-day agenda. But that perspective is shortsighted. Over the last few decades the prospects of American companies have diverged from both those of the average American citizen and from those of the communities that underpin those companies. Against that backdrop it’s tempting for management to turn a blind eye, and to assume that the plight of the American workers is in no way tied to the success of their company. But that disconnect can’t continue forever. In the long-term, the success of U.S. companies depends on the productivity of U.S. workers, which in turn depends on the commons.
It’s time for companies to recommit to investing in the commons, and doing so means partnering with government and civil society to improve workforce skills, rebuild infrastructure, and strengthen America’s entrepreneurial ecosystems. Companies that choose to do so don’t need to reinvent the wheel. There are already a number of compelling models of collaboration to choose from. We hope that the early success of these models will inspire leaders across the country to rise to the challenge, step out of their own sectors, and get to work.