17th October 2019 0 Comments Purpose

How companies can action the Business Roundtable Statement

Should business leaders be preoccupied with purpose? In light of the Business Roundtable Statement, we outline three practical ways companies can activate purpose throughout their organisations. 

In August of 2019 the Business Roundtable, a group made up of the CEOs and other senior leaders of 181 of some of the biggest corporations in America, released a document called “Statement on the Purpose of a Corporation”, the latest of the organisation’s periodic pronouncements about the principles that it believes ought to underpin corporate governance. This new version made something of a splash, because it was a “fundamental commitment to all our stakeholders”, an eyebrow-raising statement in a world where shareholders have long come first.

In a break with orthodoxy, the Business Roundtable promised to: deliver value to customers; invest in employees, in terms of paying them fairly but also training them and fostering “diversity and inclusion, dignity and respect”; dealing fairly and ethically with suppliers; supporting the communities in which they work, including protecting the environment by embracing sustainable practices; and – finally – generating long-term capital for shareholders.

‘businesses are not abstract entities that float free of the world, but are embedded in human lives, and therefore have responsibilities and duties’

What ties all the Business Roundtable’s principles together? A focus on people, rather than cold, hard numbers. When you ditch the discourse of forecasts and P&Ls, and instead use the language of employees, customers, diversity and community, it becomes clear that businesses are not abstract entities that float free of the world, but are embedded in human lives, and therefore have responsibilities and duties.

The Business Roundtable statement has the potential to be a watershed moment. Everywhere, we see an increasing awareness of the social impact of business. Companies like Uber are criticised for creating unstable, gig-economy jobs. Millennials, according to plentiful anecdotal evidence, are far more likely than older workers to seek employment with a positive social impact. Politicians flirt with the idea of putting workers on boards, or forcing companies to give shares to employees.

Something has changed when the CEOs of companies like Blackrock and 3M sound very similar to the leaders of B-Corps. A B-Corp is an organisation which “uses business as a force for good”, is “purpose-driven and creates benefit for all stakeholders, not just shareholders.” One of the movement’s founding principles is that “all business ought to be conducted as if people and place mattered” and should “act with the understanding that we are each dependent upon another and thus responsible for each other and future generations.”

So, is business changing? Maybe. But all the fine words will remain an aspiration if companies don’t find a way to put their plans into action.

Here are three ways that businesses can put their money where their mouths are, and start creating more people-focused companies:

CHANGE TIMEFRAMES

The tyranny of quarterly reporting not only leads businesses to divert time and money away from its core business to number-crunching, it means that companies concentrate on hitting targets, and not their deeper purpose. When Unilever ditched quarterly reporting in order to concentrate on sustainability, it communicated clearly with its shareholders. Those who didn’t like it disinvested. When Levi-Strauss listed recently, it insisted on a dual-share system, where the votes of family shareholders – whose timeframes are multigenerational – have 10 times more weight than others. Many European family firms have similar set-ups, and in Italy the law gives long-term shareholders’ votes more weight than others. Human timeframes can become part of a company’s framework.

LOOK AT EMPLOYEE EVALUATION METHODS

Change the ways employees are evaluated. All too often firms judge people on whether they have hit targets, which ignores the human side of work. Goldman Sachs or Enron-style “rank and yank” systems where a certain percentage of people are sacked, or deemed to be failing, only encourage a culture of backstabbing where people are incentivised to sabotage colleagues.

Microsoft asks employees to reflect on inclusiveness during evaluation interviews, and partly judges them on their approach to it. Another problem is computerised HR management systems are blind to the human side of work. New-generation ones such as Humu, Glint and Culture Amp are more people-focused, and aim to measure engagement and happiness.

CHOSE RELATABLE LEADERS

An engaging leader who listens and can communicate in an emotionally intelligent way can cascade their style through a business. Microsoft’s Satya Nadella is a great example, and his thoughtful, creative style is successfully changing the business’s culture.

Mary T Barra, CEO of General Motors is renowned for honesty and straightforwardness and is not afraid to face employees’ feedback in town halls. Leaders who don’t have natural approachability can choose someone else who complements their skills, as Sheryl Sandberg does with Mark Zuckerberg at Facebook. Leaders set a business’s tone, and an empathetic one can have a profound impact on a culture.

The move towards more purposeful, people-centric business will be a rocky one, but it is the right one. The good news is that trailblazers are already showing the way.


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