Ronald Coase argued that corporations exist to avoid the transaction costs of the free market. Yet with transaction costs plummeting (spurred by rising connectivity) this rationale no longer holds up. Why, then, do companies exist?
The answer is identity. People long to belong, and they want to be part of something bigger than themselves. Companies that fixate only on profits will lose ground to organizations that create a strong identity that meets employees’ needs for affiliation, social cohesion, purpose, and meaning.
Future-ready organizations accomplish this in three ways: they get clear on their purpose; they know how they create value and why they’re unique; and they create strong and distinct cultures that help attract and retain the best people.
Authors: Aaron De Smet, Chris Gagnon, Elizabeth Mygatt
Source: McKinsey Quarterly
Subjects: General, History
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