“There is nothing wrong with creating greater shareholder value or making a profit in your company… …However, there is something wrong when a Fortune 500 company doesn’t consider that its primary mission should be to exist for the sake of others, and not just for the sake of others in their exclusive shareholder family, but for the sake of making this world to the least and the last a better place.”
— Dr. Tony Baron, The Art of Servant Leadership
On the Right Side of History by John C Bogle represents chapter six of the book we are using as a guide, Practicing Servant-Leadership: Succeeding Through Trust, Bravery, and Forgiveness by Larry C. Spears and Michelle Lawrence.
In this chapter, Bogle provides us with a captivating overview of the Vanguard Group, a mutual fund organization that has, since its inception, used the principles and philosophy of Servant-Leadership to make it a leader in the mutual fund industry. Bogle argues that Vanguard’s principles of creating a corporate environment that encourages its staff to do the right things in the right way have placed them on the right side of history.
It’s fascinating to read the story of the Vanguard Group and how they have surpassed their competitors in the industry by fostering a single focus on serving their fund’s shareholders. creating and maintaining an attitude towards low costs, and utilizing conservative investment strategies and concepts. Operating under the Servant-Leadership philosophy, the Vanguard Group enjoys assets topping 400 billion, cash flow at 50 billion, and switching to a no-load distribution in 1977, making the Vanguard Group that segment’s largest unit.
How do they do it?
Bogle takes ideas from Greenleaf’s essay, Building a Model Institution that provided the wisdom and vision for what has manifested at the Vanguard Group. Here is a re-cap of each.
Distinguished Serving Institutions
Employees who accept the challenge of discipline to operate in a higher consciousness are lifted to a nobler stature and are more effective. They are likely to achieve greater with less discipline in the workplace.
An Understanding of Leadership and Followership
Everyone in any institution is part leader and part follower. It follows that those employees that are natural servant leaders are the ones that should be empowered to lead.
Organizations that place an importance on organizational structure and culture understand how power and authority are handled. In this way, a discipline towards helping employees accomplish their goals for themselves and others make for a successful organizational structure. The Vanguard Group places the most power and authority with the fund shareholders rather than the managers. In essence, the collective power rests in the hands of those Vanguard serves.
The Need for Trustees
The Vanguard Group understands the need for trustees. That is those persons in whom ultimate trust is placed. These persons are objective, unattached persons that stand apart from the organization offering a detachment commitment that insiders.
Not only are the above-mentioned characteristic vital to the success of the Vanguard Group, but so is foresight and caring. Foresight is crucial to leaders to navigate the unknown. Foresight is about operating with a sense of purpose and objective, moving toward and embracing the unknown and harnessing the talent to manage the process for reaching new goals. Finally, the third is to have people who care about the organization.
Bogle puts it this way, “the institution must be the object of intense human care and cultivation. Even when it errs and stumbles, it must be cared for, and the burden must be borne by all who work for it, all who own it, and all who are served by it, all who govern it.”
At the end of the day, “the Vanguard way” is about creating extra value for its investors and indeed, their peers recognize this value advantage. Others in the industry didn’t pay attention until 10 years after the Vanguard Group’s success was noticed. And, they are being copied, but not with much enthusiasm.
Servant-Leadership is on the right side of evolving corporate history and the policies and procedures, that is, the consciousness that Vanguard adopted a quarter-century ago makes them a valuable Servant-Led institution today. To learn more about the Vanguard Group, click here.
To Servant-Led Organizations,