It was Forrester that predicted that 2018 would be a “year of reckoning” for the corporate world. With the recent release of the Business Roundtable’s Statement on the Purpose of a Corporation that was signed by 181 prominent CEOs, it seems that reckoning has arrived.
Business Roundtable has issued its periodic Principles of Corporate Governance since 1978, but this recently signed statement is the first that puts stakeholder responsibility on equal footing with shareholder responsibility. “The American dream is alive, but fraying,” said Jamie Dimon, chairman of Business Roundtable, as well as chairman and CEO of JPMorgan Chase & Co. “Major employers are investing in their workers and communities because they know it is the only way to be successful over the long term.”
The Statement on the Purpose of a Corporation dictates five pillars that all participating corporations pledged their support to:
• Delivering value to their customers
• Investing in their employees
• Dealing fairly and ethically with suppliers
• Supporting the communities they do business in
• Generating long-term value for their shareholders
However, from what I’ve seen, the real question on many people’s minds is: Is this a shift in corporate culture as we know it, or just feel-good PR? I believe it’s the former, and here’s why.
Many brands are realizing that consumers might not trust them as much as they thought, and brand loyalty is being spread among so many choices. Emphasizing this, customer satisfaction scores across many key industries are overwhelmingly flat and even down this year. Satisfaction with the U.S. Postal Service decreased the most, by 4.1%, followed by automotive and consumer shipping, which are both down by 3.7%.
At the same time, many people are losing faith in the ability of government, religion and higher education to create a positive impact. It seems that institutions that have been counted on for centuries may be letting people down.
While corporate America isn’t perfect, some today believe that businesses have more latitude to effect change than historic institutions. Many companies have realized that it’s shortsighted to hinge perceived value on shareholders alone. At the end of the day, the one thing that all businesses need is a consumer base that believes in them. If you don’t have customers, you don’t have a business.
This also comes at a time when there’s an increase in purpose- and values-driven organizations. It seems that the people have spoken: More than 90% of consumers around the world “would switch brands if a different one was purpose-driven and had similar price and quality.”
And if customers feel this, imagine what employees feel. Consider, for instance, that companies with more engaged employees show 21% greater profitability than those with less engaged employees, according to Gallup. It seems that satisfied employees can be a key to profitability.
Change Starts Internally
Every organization is different, but we believe that a critical step toward growth is empowering employees, especially those on the front line, because a great employee experience often precedes a great customer experience. Through our work with Fortune 500 organizations, we’ve found that customer-centric cultures can be cultivated by aligning employee belief systems with both intrinsic and extrinsic motivators. Furthermore, when employees are presented with customer understanding that enables a deep sense of empathy, they are more apt to act on behalf of the customer and become a proxy for the corporate mission. Organizations that clearly define a link between employees’ own insights into customers and contribution to the growth of the business can build up employees who bring forth a sense of ownership and purpose. In doing so, employees can become comfortable making decisions in the best interest of their customers without having to ask for permission.
How Will Shareholders React?
A short-term mindset may no longer prevail — if shareholders take a longer-term view, this new mandate doesn’t deprioritize them. All astute business owners know that there’s a balance, and over the last few decades, it seems that many businesses have tipped the scale too much in the direction of profit first. This isn’t to say that profit isn’t important — we’re simply stating that it should be seen as a result rather than a mission. If a company emphasizes having a positive impact on society, satisfied employees and loyal customers, the ultimate result will likely be profit.
How Can Other Businesses Make A Difference?
Any business can informally adopt the principles behind the Statement on the Purpose of a Corporation by emphasizing three key areas.
1. Focus on employees.
Acknowledge that employees are the most powerful representation of your brand promise, and align with them. Establish strong internal channels to share the organization’s mission, ethos and relevant news, and pair this with two-way communication while enlisting middle managers as the main artery of the feedback loop. Continually communicate to employees the significance of their role in the overall success of the company.
2. Bolster consumer insights.
Your organization likely has an abundance of consumer insights that aren’t being fully used, so empower your consumer insights, customer experience and customer analytics teams to come forth with customer understanding. Give them a greater seat at the table to ensure that the organization is truly harnessing the voice of the customer in its strategy and operations.
3. Define your commitment to the pillars.
Committing to five stakeholder groups as essential is a seismic shift for many organizations, so fully define what those commitments look like for your organization, and create metrics and associated next best actions that move decision makers through stages, beginning with your current state and resulting in your new reality.
Gone are the days when a company could deem profit as the primary measure of success. The purpose of business is to contribute value well beyond the boardroom. By following the principles set forth by the Business Roundtable, corporations can enable a broadened set of stakeholders to have a voice in defining success beyond profit. By shifting emphasis to positive employee and customer experiences, brands can take part in realizing corporate America’s full potential to be a catalyst for positive impact in the world.