New research from LRN, announced at the World Economic Forum 2014 Annual Meeting in Davos, Switzerland, shows companies earn returns on freedom. In fact, companies who build freedom into their relationships are 10 times more likely to outperform traditional organizations in the short-term and more than 20 times more likely to outperform them in the long-term.
LRN's Freedom Index reveals that the quest toward freedom in political and social spheres extends to business and has consequences for a company's bottom line. It demonstrates that companies who give stakeholders both 'Freedom From' superfluous rules and 'Freedom To' pursue a values-based mission have a competitive advantage. Those that let go of control and create values-based relationships with employees, customers, supply chain partners and communities enjoy stronger financial returns.
"At LRN we have long been fascinated by what happens when individuals are given the opportunity to achieve without conventional constraints and barriers," said Dov Seidman, CEO of LRN. "The Freedom Index offers deep diagnostic and explanatory power that reveals the 'freedom fitness' of an organization. It is an answer to the urgent challenge of organizational leadership in the 21st century."
Freedom Doesn't Come Easily. Only one in five companies exhibits high levels of freedom (i.e. reaping the benefits of being less hierarchical, more transparent and open) in its relationships with all of its stakeholders. Nearly half of all companies still fall in the low-freedom category, making them less equipped to meet growing demands for innovation, new ventures, and global collaboration.
Freedom is Low for All Stakeholders. When looking at relationships with specific stakeholder groups, levels of freedom are still low:
Only 44 percent of companies give their employees the freedom to experiment with new ideas.
Only 55 percent of companies have freed their customers from hidden charges and/or complicated contractual conditions.
Only 45 percent of companies have freed supply chain partners from excessive oversight, allowing for truer partnerships.
Only 48 percent of companies give the communities in which they operate the freedom to participate in decision-making processes that affect them, such as those involving environmental impact, training for new skills, the local labor force, use of resources, etc.
Human Values Lead to High-Freedom Relationships. How can businesses achieve freedom? By using values as more than components of a pretty mission statement. But not all values are created equal. The study shows human values (e.g. integrity, purpose, tolerance) are on average 3.7-times more influential in creating freedom for different stakeholders than non-human values (efficiency, profit-driven, risk-taking) are. Freedom, the study shows, translates into more innovation, better financial performance, and long-term success.
Low-Freedom Companies have Weaker Trust, Values and Mission. Companies that exhibit little freedom in their relationships perform poorly when it comes to trust, values-orientation, and mission (-58%, -48%, and -43%, respectively), the study found. Conversely, high-freedom companies score highly across these key dimensions (80%, 77%, 91%, respectively). This is consistent with previous LRN research. In particular, the types of companies found to thrive in the 21st Century, according to LRN's HOW Report, also tend to be high-freedom companies.