Stakeholders increasingly demand that businesses make meaningful contributions to the improvement of the world.
As consultant and professor John A. Davis explains, managing for meaning is harder than managing for spreadsheets.
He provides an encouraging analysis of today’s radically new business leadership requirements. Drawing on research and his experience as a business leader and scholar, Davis presents his case in plain, persuasive language.
He offers examples from various industries and cultures to illustrate his advice for managing your organization’s quest for change and meaning.
Business as usual cannot solve today’s problems
Making money brings corporate success, but earning profits alone is no longer sufficient in today’s changing, more responsible marketplace.Bravely facing change and incorporating meaning into your corporate processes can keep your company competitive against ever-increasing responsive, adaptive competitors.
“Developing your aspiration drives meaning for your business, casting a halo over your societal contribution activities.”
Technology company Infosys, for example, is building an educational infrastructure to make training available to people who lack access to higher education, but need new skills to address the problems confronting society. Infosys President Ravi Kumar emphasizes corporate social responsibility (CSR).
Treat your employees as important stakeholders.
More than 80% of employees want their employers to keep them informed about the firm’s financial performance, but only two-thirds of public companies, and only a little more than half of private firms, do so.
Employees also want information about pay scales, though sharing pay information can be a delicate subject. Critics of pay transparency maintain that employees may not understand why each person draws his or her salary. Discuss how you can facilitate more openness and what problems transparency could cause.
Your organization can’t fake distinction
If you try to frame your business as socially responsible without taking real actions which back that story, you will fail.
For example, a fashion company wanted to apply for a “Most Promising Brand” award. It engaged a consultant, not to help it meet the award’s requirements, but to favorably spin its current practices. The consultant declined that engagement.
Similarly, Volkswagen created its own fiasco when it attempted a “greenwashing campaign”: trying to present its diesel cars as environmentally friendly, when, in fact, this was not the case.
“When your company genuinely pursues bettering society, you will have a distinctive advantage over competitors stranded by a fixed mind-set on an ever-shrinking island of obsolete business practices.”
Customers will pay one-sixth more if they enjoy a great experience
Research by PricewaterhouseCoopers found that customers are willing to pay one-sixth more if they enjoy “a great experience.”
Half of Latin American customers will react to a “bad experience” by ditching the company that provided it. Worldwide, a single bad experience will motivate about a third of consumers to do the same.
Employee experience is similarly powerful. More than nine out of ten Gen Z employees believe their employers should be involved in social issues.
For many Gen Z job-seekers, this factor trumps salary.
Don’t wait for a crisis to instigate change
Your firm’s response to a crisis can offer a productive context for communicating why things must change. During hard times, such as the pandemic, business leaders must address new ways of working, managing supply chains and staying on top of changing markets.
Communicate simply and clearly, so your stakeholders understand what change will mean for them. Staff members who might not normally engage with customers should do so. This makes customers recognize that you hold them in high esteem and helps the company understand current consumer trends.
When Nike followed this path, it developed a program to recycle shoes, grinding them into materials to make ground coverings for athletic use. The company has not completely eliminated waste, but has significantly reduced its environmental impact.
Practice transparency
The level of trust a company enjoys depends on its transparency.
The Economist found that business scandals cost affected companies nearly one-third of their market value. When consumers trust a brand, they recommend it and defend it against critics. Influencers often wield more force than advertising.
Red Hat CEO Jim Whitehurst acquired a company with some non-open source code.
Red Hat was an open source business, but Whitehurst decided to take the proprietary code to market anyway. In the face of negative responses, he admitted his error and ordered a rewrite, even though doing so put the product release a year behind schedule.
Whitehurt’s public dedication to transparency protected consumer trust and Red Hat’s reputation.
Positive societal value
Transformation is not just about how to make money but how to create positive societal value.
If your business ecosystem needs more attention, plug its holes and bring participants together for the greater good. If this has political implications, be sure you understand the potential impact on stakeholder and public relationships.
Use your data, share it with your stakeholders, and project your near and long term ESG performance, as you would project financial results. You might have value chain relationships you maintain only due to price advantages. If they don’t advance your new goals, get out of them as gracefully as possible.
Authentic transformation should permeate your institution
To bring about a business transformation, first define the chief strategic challenges you face in the near future. Delineate the results you want and work backward to recognize what you need to do to reach them.
Consider whether you have the capacity and skills you need. If not, work to obtain them. Concentrate on each step in turn. How the company did things in the past or outdated best practices should never constrain you.
“A business’s impact should be felt the same by people inside and outside your company.”
Transform your market image through a communication program carried out in month-long sprints – a structure that abets fast action.
The Culture you nurture
Nurture your employees’ humanity and help them to become comfortable with the possibility of making mistakes. Doing so cultivates trust.
Hotel entrepreneur Chip Conley speaks of “karmic capitalism”: the idea that businesses prosper when they help improve society. His company, Joie de Vivre Hotels, has more than 50 unique properties.
Conley also founded the Modern Elder Academy, a school where people undergoing midlife transitions can reinvigorate their knowledge through workshops, classes and personal guidance.
