Why Corporate Social Responsibility is not enough.

‘The purpose of business is business’’

Milton Friedman (1962)

In the last 20 years income inequality has risen with household wealth of the top 10 per cent of society now more than 100 times the wealth of the poorest 10 per cent;  The major institutions, such as central government and banks have been found wanting; trust is at an all time low and financial institutions are seen as a key part of the collapse.  The big government institutions of the post war era seem unable to work; the NHS, Social Services and Benefits seem are political hot potatoes.  There is a growing need for change in the world.

The neat divisions of public, private and third sector are falling away.  Charities are filling the gap left by failing public services.  The demographics of society are shifting as the ageing population become simultaneously more dependant and more socially active; with the availability of time, ability and a pension.  Young people, saddled with student debt and no hope of home ownership remain living with their parents, insecure and frustrated, with diminished job prospects. 

Social media hold individuals and governments to account; this rise of the ‘connected society’ drives the need for better conversation rather than state control.  In this era of fiscal austerity, the moral volume is turned up.

To date some organisations have responded through Corporate Social Responsibility initiatives, each with a laudable purpose and demonstrating how organisations can improve their world.  In the new world order this is no longer enough.  Organisations are being challenged to rethink their essential purpose.  The narrowness of self interest and share holder value replaced with a wider social activism and moral purpose.

Corporate Social Responsibility is no longer relevant and instead is replaced with a new understanding of the world that drives the moral and social purpose of an organisation.  No longer is it enough to focus on our customers; it is about recognising the wider number of lives that we touch.

From customers to the lives we touch; from transactions to relationships;  from shareholder value to societal value; from short term profit to sustainable profit; from high street presence to community asset; from wealth creation to creation of the common wealth.

How will institutions redefine their role in rebuilding community, stimulating social activism and engagement for the next 100 years.

‘The purpose of business is to create shared value’

Michael Porter 2011

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Ernst &Young and 2020 PST, ‘The Deficit: A Longer Term View’ (2020 PST: 2010)

Jesse Norman MP, ‘Patterns of Attachment’ (RSA Journal: Spring  2011)

My Generation!

The sad fact is that in the UK and the developed world, we are slowly depopulating ourselves.  Birth rates are falling whilst longevity increases; in 2006 there were more 55-64 year olds than 16-24 year olds for the first time.  Whilst the ‘grey pound’ is a great opportunity for some businesses and the increasing need for related services this is an opportunity that is well catalogued.  At the same time the emerging next generation of future business joiners are proving to be very different to previous generations.

The Baby Boomers are the post war era generation, born between 1946 and 1964; whilst Generation X’ers were borne between 1965 and 1980.  The latest generation, ‘Generation Y’, are just coming into the working population and born between 1985 and 1995.

Each generation has different aspirations and ruling ideologies.  For the early Baby Boomers, growing in the optimism of the post war era and the sense of making the world a better place they continue to strive and believe that duty and patience pay off; often driven by an ethic that can best be summed up as ‘work hard and you will do better than your parents’.  For the late Baby Boomers they grew up in a world that saw its heroes crumble, be it Nixon or Kennedy; empires retracted and the cold war bred suspicion and a need for freedom; Woodstock and Flower Power were the anthem of the generation.

The Generation X’ers added disrespect for authority to the need for freedom and disregarded the need to accumulate wealth and position.  A generation that had been told that they could have it all now actually decided to take it! 

It is perhaps too early to tell what Generation Y will bring to work; early indications suggest independence, social conscience, confidence and technological savvy.  They have new heroes that are more likely to be sporting than musical; they have embraced the democratic principles of the internet and are driven by brand and not loyalty; the free availability of credit means that they want it now and can have it too!

We face a world in which the Baby Boomers control the institution; Generation X are the managers and Generation Y are the consumers and new joiners.

Effective organisations need to look inside themselves to tap the rich source of ideas and energy.  To think about how they are defending themselves against another generation and to nurture and develop new talent.

The questions to ponder are:

• How am I defending my generation?
• How are we appealing to a new generation of employees?
• How do we recruit and train them?
• Once we have them, how do we manage and keep them?

Finally, try this, judge a generation by its heroes:

Churchill, Kennedy, Thatcher, Bob Dylan or Ellen Macarthur?

Who are your heroes?

So what’s your ‘Campaign Ticket’ - Learning about Leadership from the Recent Elections

On the 12th May the UK had a new government and a new Prime Minister and for the first time in 70 years the UK found itself with a ‘hung parliament’; which broadly means that no single party has a significant majority and instead every policy will have to be negotiated and fought over in ways that a majority government would never have to do. In the UK 9.4m people watched the first televised debate by the three major party leaders – a scale of viewers that is (sadly) only bettered by the series ‘Britain’s Got Talent’!

Ram Charan in his authoritative book on leading and managing ‘The Eight Know How’s’ recognises the importance of leaders being able to ‘connect the dots by pinpointing patterns of external change ahead of others’ and then ‘positioning’ the business to respond. He recognises how a great leader can ‘deal creatively and positively with societal pressures that go beyond the economic value creation activities of the business. This brief article aims to challenge leaders to stand back from recent events and understand and interpret them for the benefit of their organisations and in particular to extract some lessons for leaders from the recent election campaign.

In 2001 the disgraced energy company Enron collapsed and yet it espoused a set of values that would have been quite believable had it not been for their breathtaking corruption:

RESPECT: We treat others as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness, and arrogance don't belong here.

INTEGRITY: We work with customers and prospects openly, honestly and sincerely. When we say we will do something, we will do it; when we say we cannot or will not do something, we won't do it.

COMMUNICATION: We have an obligation to communicate. Here, we take the time to talk with one another...and to listen. We believe that information is meant to move and that information moves people.

EXCELLENCE: We are satisfied with nothing less than the very best in everything we do. We will continue to raise the bar for everyone. The great fun here will be for all of us to discover just how good we can really be.

Ever since James Collins and Jerry Porras popularised the importance of defining an organisations vision, mission and values, we have become slaves to what has been classed the ‘corporate culturists’ the idea that we must manage, lead and shape the culture of an organisation in order to engineer success. The problem is that the last decade, culminating in the economic crisis of 2009, has shown that this is probably complete bunkum.

2009 will be recognised as the year when all our excesses caught up with us, when we individually and collectively were found to be living beyond our means with money that was irresponsibly loaned. Ironically it is debatable whether anyone actually broke any ‘rules’. The scandals involving MP’s expense claims included such extravaganzas as having your moat cleaned, your swimming pool maintained at your country residence and purchasing antique rugs. The point is that as well as being uniquely barmy, in a British kind of way, most of the claims were allowed within the ‘rules’ but were objectively beyond that which common sense should allow. So yet again, bizarrely the rules and legislating were not enough.

We know already that in the emerging decade the major issue will be ‘Trust’ . All major institutions, and especially businesses, need to become ‘trusted institutions’ and that the court of public opinion that is increasingly Twitter, Facebook and the full breadth of social media can, and will, damn you quicker than you can write a press release. Witness Tony Hayward’s bumbled attempts to play down the environmental disaster in the Gulf of Mexico (!).

So if we are saying that we have moved beyond ‘mission, vision and values’ and that we increasingly judge our leaders against a higher moral code were does it lead us?

For me the answer is to think about something more encompassing that brings together values, beliefs and purpose in to what I call a ‘campaign ticket’.

The idea of a leadership ‘campaign ticket’, whilst unfortunately borrowed from our least trusted institution – politics - remains a useful construct. In the UK judgements were made in the recent televised debates on each of the leaders’ performances that decided the final election result. We know from research into the US Presidential televised debates that performance on screen is far more important than the content – with radio listeners ranking Nixon the winner, whilst TV viewers ranked Kennedy the winner in the first televised debate in 1960.

How many people do you know who have actually read any of the three main parties’ manifestos? In the UK debates, whilst great effort was put into party manifestos ultimately they were not the key factor in the election success, instead judgements were made about competence to lead, trust and an interpretation of what people ‘stood for’. That is what we mean by ‘campaign ticket’ – having a really good manifesto is a bit like having a great business plan and believing that people will follow you because of it. Now I am not saying that a good business plan is unimportant but rather that more important than that is how people make sense of who you are, your standards and what you are trying to achieve.

Nick Clegg the Leader of the Liberal Democrats was the surprise winner of the first TV debate, largely because people made judgements about his character rather than policies alone. It is the same for leaders in organisations, everyday people in the organisations make judgements about their leaders and their interpretation of their ‘campaign ticket’.

So if you are a leader think carefully about your ‘campaign ticket’; some of the questions to consider are:

• What are my standards that I will make clear to those around me?
• What is my compelling, all consuming set of beliefs about where we are going?
• How will I help people to understand my beliefs about how and where we are going together?

Finally, one of my clients was recently approached by the charity Save the Children to provide support for the victims of Haiti and received a reply ‘as Haiti is not a priority area or an area of operation for the company it would not be something that we can support’. It was not in the business plan or a set of Corporate Social Responsibility Guidelines so was not applicable and yet by any greater morale compass, there is no doubt what ‘right thing to do’ was. As chance would have it the CEO of the organisation, who has a strong campaign ticket about the social responsibility of businesses intervened and common sense prevailed!

Getting it right in your organization in 2010

Economically no one can be in any doubt that 2009 has been one of the most dramatic years that most of us are likely to have lived through. The demise of the major financial institutions has led to tectonic shifts in the economic landscape. Who would have thought at the start of the year that we would end up with one in four pounds now borrowed and a nationalised banking sector!
Whilst we all have opinions about both the origins and future of the crisis, there is broad agreement that an increase in liquidity was squandered for short term profit; 'share holder value' became short hand for 'share price manipulation'. Many made significant sums of money, if they were smart enough to ride the wave up and get off at the top; sadly for most of us this was not the case and now looking at our pensions or endowments they are proving to be a shallow pool. The advice that we were given from seemingly large and respected institutions has frequently been proven not to be in our best interests and we feel we have been massively let down.

We know that into the space left by this market failure will be increased regulation; an attempt to regulate our way to a better future. For example in financial services this is being championed by the FSA and in particular through its ‘Treating Customers Fairly’ initiative. However, whilst we believe that this is to be applauded it should not be regarded as another regulatory hoop to jump through but instead be regarded as a significant opportunity to re-evaluate how a business works for the benefit of customers, staff, shareholders and wider society.

The MP's expenses scandal shows that living by the rules alone is not what we have come to expect of our leaders; we expect them to demonstrably live to a higher set of standards and values. These values should be unquestioningly for the wider good and be informed by our perception of 'fairness'. Increasingly we apply the same principle to what we perceive as society's valued institutions. Financial institutions are an economy's key vehicle for wealth creation and must be challenged to take up that role.

The opportunity for leaders in financial institutions is to use the drama and crisis of 2009 and the market breakdown to create a change imperative in their organisations.

That change is not just about more customer smiles but instead re-positioning an organisation to be a champion for customers and re-positioning it as a trusted institution. This means leaders re-defining an organisation’s purpose to be more than just serving shareholder value alone. We firmly believe that shareholder value remains important but needs to be re-framed as shareholder value for the long term and as an accurate measure of both profit and contribution to a country's and community’s economic growth.

In 2009 customers were dramatically re-educated to think about the long term, because of short term market failures. In this new era businesses must redefine their purpose, they must recognise the importance of the long term, building lasting and trusted institutions. We know that the state will increase its role and provide ‘libertarian paternalism’ a sense of having enough regulation to guide and protect and yet not stifle actions - more importantly values really matter. This has been summarised by Akerlof and Schiller (2009) as moving from ‘fear and greed’ to ‘commitment and fairness’.

The internet and social media means that leaders and institutions are more accountable in the court of public opinion; not just against the rules but against our perceived notion of what is fair. We are moving from Adam Smith’s invisible hand of capitalism to a new form of social or creative capitalism which redefines it as ‘the invisible handshake’.

The new heart of business will be about simplicity, transparency and products that are not over engineered; people want to do business with those that they trust; a trust based on a visible demonstration of the principles of fairness.

Self regulation, or principle based regulation, is no soft touch but instead a much harder challenge as it asks an organisation to be clear about its values and sense of purpose. Society is challenging major institutions to think about its purpose in a far broader way; a way that serves shareholders and society and builds long term sustainable value.

Boards need to face the challenges of 2010 as not just leaping through regulatory hoops, but instead as a huge opportunity for leaders to drive reposition themselves and to drive big change in their organisations

Leadership and the importance of history

I recently had the privilege of working at Windsor Castle, which was an amazing experience and a memorable setting. As chance would have it we were there on the 11th November and broke off from our labours to commemorate the fallen from two World Wars and recent conflicts. I also took the opportunity to wander around St George’s Chapel, established by Henry III in the 14th Century and the burial place of Henry VIII and Jane Seymour, it is also home to the Knights of the Garter, the world’s oldest chivalric order.

The richness of the history and traditions was inescapable and given added poignancy on Armistice Day. What, however, has this to do with leadership and senior teams? What struck me most deeply was the way in which each previous generation of royalty built upon the legacy of the past; each leaving great monuments that testify to their ambition, which, at times, was wildly disproportionate to what was needed or was reasonable.

I wonder what enduring legacy the leaders of today will leave for future generations? Sadly our environmental legacy will be a permanent scar for our children and one which they will only look at in amazement at our naivety and lack of courage to act. The short termism of driving shareholder value has shown to distort the market and corrupt the judgement of good people. Whilst we are gripped by the fear of recession there is a danger that we do not think about the bigger issues of ‘what is our legacy?’

The history and traditions on display at Windsor is a great reminder of the importance of the past and it challenges me to think about how senior teams recognise and learn from the past as well as think about the legacy that they leave for the future. Finally I like the quote from Zhou Enlai, the former Chinese leader from 1949 to 1976, who when asked about his thoughts on the French Revolution of 1789 he replied ‘it is too early to tell’. Maybe we need to start to challenge senior teams to shift their time line so that they can acknowledge the past as well as think seriously about their enduring legacy.

Working with Senior Teams

I am now working with a number of senior teams that by any measure are performing at a high level - the challenge is to take them, to the next level and if I can characterise this it means being able to have a level of debate that people can sustain whilst sustaining strong relationships.

Does anyone have any ideas or experience on this?

Welcome to my blog and why you should read this!

Everyday I have the privilege of working with Senior Teams and Boards that challenge me to think in new ways; as a strongly reflective practitioner I am always learning and take that learning forward to work with each of my new clients. I feel that it is important to share that learning for the benefit of others and also to develop my own practice through the debate and challenge that is afforded by the interactive nature of this blog. My hope is that you will want to challenge my thoughts and help develop them further as the conversation unfolds.

I look forward to hearing from you and sparking a wide debate!