I feel like the business world is finally catching up with me in believing it has a purpose beyond the maximisation of profit.
Of course I have not been alone in thinking this for the past 20 years.
Many businesses – particularly those that are family or privately owned – have never lost focus on being part of their community.
Still, we’ve been through some dark years when the articulation of success in many publicly traded companies has concentrated solely on maximising returns for shareholders, and on concentrating earnings within a minority of senior executives.
Some companies have taken the maximisation of profit to extremes: depressing the wages and undermining the job security of their employees to a level where they rely on state ‘in work’ benefits to be able to afford to live, while paying their CEOs extreme multiples of the lowest-paid person in the company.
These trends have divorced companies from seeing themselves as part of a thriving community within which they provide employment and pay taxes, and to which people from the community provide their labour in return for a fair wage, which affords a decent life.
Corporate Social Responsibility
During the past 20 years we have seen the rise of Corporate Social Responsibility (CSR) through which companies make a great show of ‘giving back’ to their communities, through tactical, usually under-funded, programmes (involving a paintbrush and a company t-shirt), or through non-strategic grant-making.
CSR activity can be associated with inauthentic or marketing-lead activities. Some companies use CSR as a sticking-plaster to hide slaves or child labour in their supply chain. Cynicism about CSR results from companies involved in tax avoidance being praised and awarded for supporting social causes through volunteering, grants and programmes.
READ ALSO: Mintzberg: Please Welcome CSR 2.0
Arguably these activities mean little if a company is not paying to build or maintain infrastructure such as sewers or fire services on which the continuity and safety of their businesses and employees depend.
Still they fund concert halls, libraries and sometimes schools or hospitals, which are enormously beneficial to communities, but which should be in addition to paying tax to meet core shared infrastructure needs, and ensuring that all their employees have decent, dignified, well-paid work.
However, the tide seems to be gradually turning. While some old-style companies and CEOs are clinging on by their fingernails to their outdated ways of doing business, some strong forces of change are emerging.
Bringing Purpose and Values into Business
This next generation of leaders is showing itself to be more diverse and more naturally connected with social and environmental causes.
We may have social media to thank for this: younger people, digital natives, don’t necessarily separate their work and private lives in the way that older people expect to. They don’t accept they have to leave their values at the door when they go into work; they want to be able to express their passionate advocacy of social or environmental change inside work and for the company to give them time and resources to do so.
Even from the current generation of leaders, we have some powerful, slightly unexpected, and much-quoted new advocates of business needing to bring values back into the workplace and for companies having a purpose beyond profit.
One such voice is Laurence D. Fink, Founder & CEO BlackRock, who in an article in the New York Times in January 2018 said:
“Society is demanding that companies, both public and private, serve a social purpose … To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society”
Researching ‘Purpose Beyond Profit’
Over the past two years, a colleague and I have interviewed 30 companies, large and small, global and local, in many different sectors including retail, finance, consulting, technology, telco, hospitality, food & beverage, extractives, wealth management, pharmaceuticals, energy, beauty, insurance, recruitment, engineering, housing, and PR.
There is a shift happening – away from tactics-focused, under-funded CSR delivered by someone in HR or marketing – towards having a thematically aligned social or environmental purpose, tightly tied into a company’s resources and commercial objectives, staffed by a small, strategic, expert team, and considered material throughout the company, from Board level and down.
Our interviews revealed that nearly all of the companies are on a journey of ‘reinvention’, having suffered a decline in, or threat to, business as usual.
The challenges they face, which are driving change, include:
- economic downturn
- reputational damage
- poor image with customers
- struggling to hire and retain top talent, particularly millennials
- needing to reach into more diverse pools of untapped talent
- fending off competition from a leaner, more innovative, tech-enabled challenger
- having a tired product or brand
- being slow to respond to the trend towards customers valuing experience over transaction
Technology, Innovation & Purpose
All the companies we interviewed are ‘pivoting’ to thrive and survive around the use of new technologies; being proactively open to innovation from a wide variety of non-traditional sources; and embedding a strategic purpose beyond profit into the core of the business.
I want to focus here on highlights we heard on the purpose part of the pivot – from the people who are tasked to ‘sell’ the new purpose agenda and make it work in their company. These might prove useful for others who are thinking of embarking on this journey:
The demands of millennials help older people too
- While many companies are changing to meet the needs of their millennial workforce, bringing purpose to the forefront can have an equally motivating effect on older / longer-term employees who remember and reconnect with the values that motivated them to join the company in the first place.
It’s good to look back as well as to the future
- In developing their purpose-lead narrative, many companies are starting to look back to a time when their business was smaller, or more connected to society, and so they are reconnecting with the story of their founder, or the values of a leader from an earlier stage of the business;
- Companies which never lost their connection to society have started to shine a brighter light on their long-term philanthropy or community engagement objectives and are finding it useful as an authentic market differentiator
Ownership makes a difference
- Privately-owned companies have a big advantage in being able to make quick turn-around decisions on purpose work – particularly where it might have a negative impact on profit
You need to learn to value diverse expertise
- The emerging model for a successful business with an integrated purpose is to have a small specialist empowered team working in partnership with external experts including NGOs
- The purpose work can have more integrity if it is staffed and delivered by people coming from NGOs, government as well as from other parts of the business
- Still, it can be hard to hold on to people who have come from non-business backgrounds, who can feel alienated, stereotyped as the ‘do-good sandal-wearer’, or that their work is still undervalued compared to the profit work
Your purpose needs to be material to the business
- Most successful purpose work reports into the Board and C-level, and is a strategic priority for the entire business with goals that are included, measured and rewarded alongside revenue and other commercial goals, and included in every employee’s performance assessment
You need a big, inspiring, integrated, strategic end-goal
- Having a big vision helps everyone in the business to understand the goal of the purpose work and to see how their contribution is helping to progress the desired end-state for social or environmental change
- Setting some short and long-term goals, and tracking, measuring, evaluating, and reporting helps to show progress
- It helps to focus on achieving something that is relevant to the business and its resources eg.
- A building society focused on the provision of housing
- An estate agent helping find homes for homeless people
- A global bank focused on financial inclusion in Africa
- A luxury fashion company working to empower women and girls
- A publisher focused on the provision of education
Relationships with NGOs can be difficult
- Companies and NGOs may clash over speed, timing, and delivery of objectives: a company may be working to an annual outcome, but the NGO is more likely to be focused on long-term systemic change
- It’s still difficult for many NGOs to trust that companies really want to ‘do good’ and would prefer to be given a straight donation of money to carry on the work they are already doing rather than co-deliver a program with a company
An Early Stage Purpose, Meaning & Value ‘Bubble’
As I am often reminded – by business reports, the news, friends, colleagues, supporters, and detractors – we are still in an early-stage purpose ‘bubble’.
I am fortunate to work with many companies who have already understood their responsibilities and are actively seeking to implement their purpose beyond profit.
However, there are still too many times when I see a company’s CSR report with the CEO taking part in a sponsored run or painting a fence. We have a long way to go, but we are making a good start.