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Commenting recently on the financial services industry, Harvard Economics professor Benjamin Friedman argues that we do not really know the true costs of the system.

For example the biggest gains seem to flow to people who ensure that microscopically small deviations in asset prices “last for only one millisecond instead of three.” 1

Likewise, in the pursuit of nuclear power, we do not really know the true cost. The latter is seldom presented with the full social price of subsidy and the long term costs of dealing with toxic waste that may need decades if not centuries of expensive care.

Finally, what of the unused potential in companies that is now so clearly in the public arena as a result of the Macleod report on engagement? 2

That up to a third or more people feel underused or do meaningless work in often inhumane environments certainly has costs that are not measured. Such costs would probably need to be expressed as lost innovation, missing profits and lack of social goods.

Not being able to produce useful metrics of costs, whether for financial services, the nuclear industry or in wasted employee potential is rather strange. We live in an era when what gets measured gets managed.

So right now we are not managing potential because in most companies and in the aggregate across the nation it is not measured. Employee surveys for example merely reveal unused potential without showing the true cost to the company.

In exploring what she calls Vanguard companies, professor Rosabeth Moss Kanter describes how they create innovation, profits and social good. These are companies that are ahead of the pack and show what the future for the rest of us may look like. 3

Vanguard companies clearly know a great deal about the cost of wasting potential. They understand that they live in an era of uncertainty, volatility and complexity. They have as Kanter argues, grasped the need for diversity while erring on the side of transparency, all of which helps to first reveal and utilise their people’s potential.

An important characteristic of the Vanguard companies is that they have a social purpose and are values driven. This in turn produces the benefits and value of “engagement, the dialogue, the conversation.”

A social purpose is nothing as flaky as mere corporate social responsibility. Instead true social purpose is about real change, not spare change, and leads amongst other benefits to “the possibilities for success at every point in the innovation process.”

This brings us right back to the unmeasured cost of wasted potential. The real cost is not just in human terms, in wasted lives and wasted personal opportunities for growth and well being.

It is also about the financially damaging cost of lost opportunities to innovate, to open up new dialogue and through new conversations ultimately affect the hallowed bottom line of a profitable enterprise.

1. Overmighty finance levies a tithe on growth, by Benjamin Friedman in Financial Times, 27.08.09

2. Engaging for Success, by David MacLeod and Nita Clarke, 2009

3. Supercorp, by Dr Rosabeth Moss Kanter, Profile Books, 2009

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