Business as a community (Handy)

Charles Handy has spent much of his career questioning what a company is for. Decades before stakeholder governance became mainstream, he described business as a community of people joined by a purpose rather than property owned solely for financial extraction.

When to use it

• Use Handy’s perspective when defining corporate purpose, governance, employee voice and the organisation’s responsibilities to society and the environment.

Origins

Charles Handy developed his thinking through a career spanning business, education and management writing, including The Age of Unreason (nineteen eighty-nine), The Empty Raincoat (nineteen ninety-four) and “What’s a Business For?” in Harvard Business Review (two thousand and two). His argument belongs to a longer stakeholder tradition and draws on founders such as Hewlett-Packard’s David Packard, who described profit as an important result rather than the deepest reason for a company’s existence.

What it is

Handy’s method is to pose questions and expose trade-offs—especially between efficiency and equity—so that managers must take responsibility for their own answers.

He challenges the Anglo-Saxon shareholder model. When owners, directors and investors were often the same people, their financial interest, responsibility and pride in the enterprise were more closely aligned.

In widely traded corporations, shareholders may instead be distant, short-term investors. Handy argues that governance and legal assumptions have not fully adapted to that separation.

David Packard, who founded Hewlett-Packard with Bill Hewlett in a garage, expressed the alternative clearly:

A company enables people to accomplish collectively what they could not achieve separately and thereby make a contribution to society. Profit sustains that institution, but is not its only purpose.

Handy extends the point to corporate law and accounting.

Employees appear in accounts as costs even though their knowledge and commitment create much of the organisation’s value. Calling the enterprise a community changes the implication: communities have members rather than owners, and members deserve voice in consequential decisions.

He admires German co-determination, under which employees participate in corporate governance, while recognising that not every feature transfers directly to Anglo-Saxon systems. Every firm can nevertheless cultivate stronger membership and voice.

How to use it

Treat the business as a purposeful community and lead on social and environmental sustainability instead of doing only what regulation compels.

Business as a community

Waiting for government to impose every boundary makes business appear inherently destructive and in need of restraint. Proactive responsibility preserves legitimacy and room for self-direction.

When intangible assets represent most of a leading company’s market value, management should recognise the people who create and renew those assets.

A long-hours culture can make executive life socially unsustainable, creating modern corporate monks who sacrifice family and community for work. A viable business community must care about the lives that support its labour.

Environmental neglect can drive customers away; workforce neglect can drive employees away. The community should pursue wealth, welfare and environmental stewardship together.

Former Shell executive Arie de Geus makes a related case in The Living Company. Firms become fragile when managers focus only on output and forget the human community producing it. Long-lived companies tend to possess a distinct identity, a learning culture, community cohesion and awareness of their social and environmental setting.

The failures of Enron and WorldCom and the later subprime-credit crisis deepened distrust in capitalism. Handy warns companies to accept their community obligations before public anger produces more restrictive intervention.

Financier Henry Kravis similarly argues that moral, ethical, commercial and experiential foundations keep the corporate structure from collapsing.

A sound microeconomic foundation is also essential. Purpose cannot substitute for understanding the market system in which the firm creates and exchanges value.

Microeconomics examines the behaviour of people, households, firms and industries, whereas macroeconomics examines the economy as a whole.

Strategy needs both market demand and industry supply. Supply analysis examines the forces shaping rivalry and their effects on share, price and profit.

Demand analysis asks how large the market is and where it is going, using tools such as marketcrafting for size and HOOF for forecasting.

These tools quantify growth outlooks. Some strategists argue that relative labels—fast growth, maturity or decline—are enough until business planning, and that charts communicate choices better than numbers.

That position understates the value of rough numbers. Competitive analysis does not always support precise measurement, and visual frameworks remain useful, but strategy ultimately allocates scarce resources.

Investment decisions compare cash flows with and without a proposed strategy. Those cash flows require revenue forecasts, and revenue forecasts need a defensible view of demand.

Quantification should not wait until after the strategy is selected. Calling growth “fast” is ambiguous: does it mean 10 or 25 per cent a year? Is 2 per cent slow, or is 5 per cent, and are those rates real or nominal? Approximate ranges improve comparisons of risk and return.

Only when useful demand estimates are prohibitively difficult or expensive does delay become compelling. Basic sizing and HOOF forecasting are designed to remain simple and economical.

Use them as practical estimates, disclose assumptions and refine the numbers as strategic commitment increases.

Top practical tip

Translate “community” into governance: define the shared purpose, identify member rights, create credible employee voice and assign measurable social and environmental commitments.

Top pitfall

Do not use the community metaphor to avoid hard trade-offs or economic discipline. Membership claims are hollow without rights and accountability, while a community that cannot remain financially viable cannot fulfil its purpose.

Further reading

Handy, C. (two thousand and two) “What’s a Business For?” Harvard Business Review, December.

Handy, C. (nineteen ninety-four) The Empty Raincoat: Making Sense of the Future. London: Hutchinson.