Balancing Enterprise Survival And Accountability

Balance between survival and corporate responsibility

There have been some incredible corporate reactions in the corona virus crisis. Google has pledged $ 800 million in ads and loans to help businesses and crisis response efforts. Unilever donates 100 million euros in food and disinfectants and guarantees the jobs of all 155,000 employees – including contractors and employees.

These stories are inspiring. But they also seem unrealistic for most companies. What if you are in an industry that is not directly affected by the crisis, e.g. B. in property insurance? What if you are a small business with no millions around? Or if you are a large company whose revenue has decreased, for example an airline? You know that it would be "right" to keep all workers fully paid – but you would go bankrupt and you would lose your job permanently. There are indeed indications that purposeful behavior ultimately leads to profit, but this is only the case in the long term. It is expensive in the crisis and companies have to focus on survival. Can managers really afford to think about responsibility?

Responsibility defined

Indeed, they can – by changing their thinking about what "responsibility" actually means. Many executives believe that the value that a company creates is a solid cake. This cake can go either to the shareholders or to society. A responsible company is thought to sacrifice profits (shareholder disc) to ensure that enough is going for society. This could mean making large donations to charities, paying higher wages to employees, and investing in reducing CO2 emissions. And that could be difficult in a crisis – or even under normal conditions if you're a start-up.

Indeed, it is important to ensure that society has a fair share of the pie. But that's not the heart of the responsibility. As I explain in my new book “Grow the Pie: How great companies achieve both purpose and profit”, responsibility is about increasing the cake and creating social value. This not only increases society but also investors, so profits increase as a by-product. Letting the cake grow means answering the question: "How is the world a better place when my company is here?" "We give for charity" or "We don't abuse our employees" is an inadequate answer. Responsibility is not about non-core activities (donating to charity) or not doing any harm (no abuse of workers). It's about actively doing good by uncompromisingly committed to excellence and innovation in your core business.

Let's take an example. Vodafone was the first telecommunications company to publish a tax transparency report on how much tax they pay worldwide. They were rightly praised for this because it is important to pay fair taxes. But this is about sharing the cake. Instead, Vodafone made a far greater contribution with the introduction of the M-Pesa mobile money service. Note that mobile money is not mobile banking. Mobile banking is when I have an account with Bank of America and use it on my phone and not in a branch. Your citizens don't even need a bank account for mobile money. Back then it seemed like a crazy idea – banking without a bank. However, this was crucial as many Kenyans had no access to banks. In the first seven years, 200,000 Kenyan households were lifted out of poverty. Many of these households were run by women, and M-Pesa allowed them to switch from agriculture to retail. It has had many positive secondary effects on gender equality.

The importance of cake cultivation is of great importance in times of crisis. There is no doubt that executives and investors are accountable for their share of a shrinking cake to reduce the burden on others. The enormous measures mentioned at the beginning – CEOs who work for free, companies that pay their employees for downtime and companies that donate their products – are highly commendable and should never be underestimated.

What can your company do today?

However, the value of thinking about responsibility as a cake grower is that all companies can develop their potential to play their role – even in unrelated industries and without donations. A responsible manager asks himself: "What is in my hand?" In other words: "What resources does my company have that I can use to serve society?"

Such a mindset can inspire some great ideas – just like Vodafone, which contributes to financial inclusion, although its core business is telecommunications. The New England Patriots may not have anything relevant in a crisis. Football tickets and replicas are of little value. However, in hand is the plane that flew to China to hold 1.2 million N95 masks and fly to Boston. Ford makes hospital gowns from recycled airbag materials.

Sometimes a company's hand is in its relationships with other companies. Qantas Airways cannot afford to continue paying its employees because the business was badly hit. However, there is a relationship with the Woolworths grocery store, where customers can earn Qantas miles for shopping in Woolworths. She uses this relationship to send her employees to Woolworths. This not only secures their incomes, but also serves a broader society as the demand for food rises sharply.

Understanding responsibility as growing the cake is especially relevant for small businesses that don't have the resources to donate slices of the cake. Two assets of equal value are traded on the financial markets – an investor pays USD 100 for USD 100 shares. But society is not a financial market. The key to creating social value is to give gifts of unequal value that are far more valuable to the recipient than they cost you.

Take Barry & # 39; s Bootcamp, the boutique gym. What is in hand is fitness know-how, with which free livestream workouts are offered – especially valuable if the citizens stay at home. There are also many staff who are trained in spiritual first aid to call those who find it particularly difficult to isolate themselves. They also read children stories about Zoom to relieve working parents.

What is crucial is that the idea of ​​thinking about what we have in our hands – what gifts of unequal value we can give – applies in both good and bad times. Responsibility certainly includes paying fair wages to employees. But this also includes looking after them, considering them as partners in the organization and giving them the opportunity to improve. Responsibility may not mean giving customers frills, but following in their footsteps, taking feedback seriously, and building personal relationships. Indeed, the book provides strong evidence that ultimately creating value for society benefits investors. So the idea that the cake can be grown and both can benefit from it is more realistic than wishful thinking. Responsibility is not just "worthy" or something that should be pursued in times of crisis. It is good business sense and fundamental to a company's success at all times.

If this crisis has a silver lining, it will permanently inspire executives to innovatively think about how they can use what is in their hands to serve society.

Contribution to Branding Strategy Insider by: Alex Edmans, Professor of Finance at London Business School and author of Grow the Pie, How great companies deliver both purpose and profit.

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