A few months ago, I caught up with a CEO from a midsize firm for lunch. He was keen to tell me that people only care about money. His business that he had successfully co-founded, was built purely to enable himself, his co-founders and employees to support their families financially. He made out that was quite noble. Yet, there was no focus on how his organisation created value for their clients. The value was all inward. When I asked him what his company stood for, his brand proposition, he told me it was to enable his employees to feed their families.
On a positive note, his organisation openly supports a lot of charities. When I walked into reception before Christmas, a big Christmas tree was proudly displayed with lots of gifts waiting for a charity to collect. It felt nice. Until he told me that he donated to charities to improve his corporate culture and to attract talent, because his employees wanted to make a social impact. Yet, still acting like Scrooge, he vehemently believed that all companies donated to charities to pretend they care, but it was really to improve their reputation (and profits).
While I respected his truthfulness that he donated money, purely under the belief that it created more money for him, I let him know that his inauthenticity was probably the reason behind his frustration as to why employees didn’t bother staying at work after 5pm. After all, they needed to bring home the bacon to their families, so they could all eat that night.
Doing Good, By Being Good
It’s very common that organisations pigeon hole their capability of “being good” purely through the limited filter of a corporate responsibility program.
This severely limits the positive benefits that companies create for society.
The obvious one is that business creates jobs, growth and wealth. It can pay wages and generate profits from which tax revenues are drawn. It can build infrastructure, strengthen communities and improve people’s wellbeing and mental health. Go to any country with a high jobless rate and you see a lot of unhappy and unhealthy people.
But the real magic is when leaders find solutions to world problems, through creating socially driven businesses. Think of the transformation a new product or service brings to the world (take the electric light, television and iPhone).
“Being Good” is very different to “Doing Good.” The distinction is really behavioural and it starts from when the company was founded. Look at the records of any company that has survived over 50 years and they were founded with the mission to improve human life in some way – from Levi Strauss, Proctor and Gamble and Disney. More importantly, they still focus on improving humanity.
Yet, somehow companies were created that forgot that they were here to serve humans. Their sole focus is to generate profits, with little or no consideration of the needs of wider society.
Without an inspiring purpose, organisations tend to fall into the elusive trap of focusing on the bottom line with profits being more important than purpose. They get lost in the false assumption that business is all about money. Rather than embedding “doing good” processes into their company, they chose to make the token effort of appearing to “be good” by taking the easy option and donating money to charity (thereby, reducing tax). After all, Enron made sizeable charitable donations and we all know that “doing good” was not part of their corporate culture. Just like the cheating husband that buys his wife flowers when he’s having an affair, companies make large donations when they’re polluting the environment, underpaying workers and ripping off customers with dodgy products.
And while profit is extremely necessary for any business, just like we need oxygen to breathe, highly impactful, exceptional businesses create more money when they focus on a positive impact for their stakeholders.
As Punit Renjen, the CEO and Chairman of Deloitte says:
“As business leaders, we should not choose between profit or good; rather, we must choose to profit from good. And that requires connecting what we do with a purpose beyond profit — a reason to exist that meets our shared sense of “doing good.”
Performance Before Profit
Today, businesses operate in a low trust environment where the majority of people don’t trust them. According to the Edelman Trust Barometer, only 52% of Australians trust businesses with a disappointing 54% trusting the company or industry that they work in.
As Indra Nooyi, the Chairman and CEO of PepsiCo says about building trust:
“The company of the future will do better by being better. We’re in a low trust environment and it’s challenging when organisations rely on a daily exchange of trust with customers, consumers, investors….balancing the long term and the short term is a constant struggle. The right answer is the ideal balance of performance and purpose working well together. Companies operate under license from society and therefore have to give something back. When we do so, we earn trust.”
The central pillar for building trust is a corporate purpose that’s defined by a genuine commitment to the social good. A socially relevant purpose that’s defined, communicated and embedded throughout the organisation provides employees with the context they need to understand how their work makes a difference to the world. And it makes a lot of sense. After all, we’re more likely to trust a company that they’re ethical, if we can see proof that they’re visibly making a difference to the world and not just paying lip service to it. After all, “doing good” automatically infers that we’re “being good” without having to fake it.
Employees really do care about their organisation’s purpose and the greater the degree of specification in a mission statement, the more employees will be satisfied with the firm’s mission. This in turn generates increased commitment towards achieving the mission, as well as improving employee satisfaction.
If you want to build a company that matters, then you need to have a clear purpose. It lets everyone know – from employees through to customers – how much you care, which in turn makes them less likely to believe you just exist to make money. Focusing on purpose rather than profits is what builds business confidence and therefore, trust.
There are two ways of doing this. The first one is creating a company right from the start that has a focus on doing good. Examples include Patagonia, a clothing store, who has the mission statement: “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” Their purpose combines both their values that have contributed to their market success (creating high quality and environmentally friendly products), as well as how they make the world a better place. And they also back this up in a tangible way by donating services and time, as well as 1% of their sales to hundreds of grassroots environmental groups around the world.
Another great example is Warby Parker a fast growth eyewear retailer. Their mission or purpose is – “Warby Parker was founded with a rebellious spirit and a lofty objective: to offer designer eyewear at a revolutionary price, while leading the way for socially-conscious businesses.” Warby Parker validates they mean what they say by donating a pair of glasses to Vision Spring, for every eyewear purchase.
The second option is for a more established organisation to align, or even create, a charitable organisation that matches their core purpose. An example is Cotton On, an Australian clothing retailer. Given that cotton is grown in third world countries and uses a lot of water, they have looked at reducing their negative impact through creating their own charitable foundation that develops and support projects in southern Uganda. It was my 11-year-old daughter who pointed out one of their trucks on the road and how she wants to buy a bottle of their water because it goes to their charity. She told me how much she loves Cotton On because of their charity work. If an eleven year old can see the link between an organisation and its charitable work, then so can any adult.
Creating a Meaningful Impact
Around the globe, CEOs are feeling increased pressure from both customers and employees to start addressing broader social issues. In the recent PwC 19th Annual CEO Survey, 82% of CEOs acknowledge that top talent want to work for companies with social values that align to their own.
This is being driven by an increased demand by the general public who believe that it’s businesses that can be trusted to improve economic conditions and not the Government. In the Edelman Trust Barometer 2016, 80% of the general public expect that businesses can both increase profits and improve economic and social conditions in the communities in which they operate.
The good news is that the alignment of personal and corporate purposes allow employees to drive organisational results, as well as to contribute to resolving societal issues. Integrating purpose-building activities into core business strategies is good for business. Many global leaders are now putting a focus on what is known as the “triple bottom line” by measuring their company’s impact across financial, societal, and environmental dimensions.
As Renjen from Deloitte says:
“What companies do for clients, people, communities and society are all interconnected. A culture of purpose ensures that management and employees alike see each as a reason to go to work every day.”
A focus on purpose, automatically pivots an organisation to focusing on long-term results, rather than short-term profits. It’s this long-term horizon that ensures its longevity. Ideally, charitable giving needs to be linked to the core ideology of a company. It makes more sense to employees and customers as it makes it much easier for people to understand the organisation’s impact. Rather than the standard piecemeal approach of donating to random charities unrelated to the organisation’s core business.
While my CEO friend takes comfort in the belief that donating to charity makes him appear caring, he has missed a genuine opportunity to create a company that matters, that would make the world worse off, if it were to cease to exist.
By really sitting down and discovering how his services helps his clients on a deep, emotional level (rather than transactional) and then connecting that to a charity, he has the opportunity to create a more expansive and long-lasting impact. Rather, than a mediocre company that stands for nothing.
After all, when we look back at our life, and the legacy we have created, a business that outlives us, is a real sign that we have made a large dent in the world. This can only occur if we set our sights on a larger vision that improves the world, rather than the limited perspective of our personal community. And really, isn’t that what business is all about?