More from Michael Porter: Shared Value (part 2)

Part 1 of this post described Michael Porter's points on business strategy at WOBI London this week, as well as my additions on organisational strategy.  However the session was really on shared value, but I think Porter needed to go through all of his earlier thinking in order to make his input on shared value make sense (since creating shared value is really just strategy, in an environment where the broader community is more important).

So competitive strategy is still really useful, but these days it isn't enough. There are growing societal problems which everyone is aware of, and a growing NGO movement etc.  But businesses aren't doing enough and its image and people's trust in it are declining. Young people are being turned off capitalism because it's not what they want their society to be like. Even the desire of company leaders to do something has changed dramatically.

Aside from the ongoing technological revolutions this is the biggest shift and strategic opportunity companies need to respond to. We need to contribute to society rather than greedily take away from it.  Business is the only instrument that can meet needs like this at scale, whilst also making money. Doing this means that we need to link society and core business strategy. We can then regain the acceptance of capitalism, and make our businesses more strategically successful too.  

Creating shared value takes our involvement in society to a new level. It addresses societal needs through business and the business model - doing this and making a profit, seeing it as part of doing business. So not just doing business and making a profit but innovating the way a company is dealing with a social issue at a profit. It moves business from Milton Friedman's concept of business just being to maximise profits, and where philanthropy is not our job, as well as from a focus on CSR which is often just window dressing and gives away money rather than earns it, and even having a social purpose which tend to be very vague, and doesn't connect with the business or how to succeed. Can shared value be something customers value, or a differentiator for the business?

Walmart is a good example. It used to be seen as company than exploited its workers. Now it pays better than average, and has introduced career paths so that lower grade workers do not get stuck. But of course, this is really just what Walmart should have always been doing anyway. So actually, all CSV is, is doing business strategy with an eye on the broader community. Or perhaps recommending a shift from low cost to differentiated competition.

And, of course, companies are only going to invest in shared value when they make a profit too. If one opportunity comes with high shared value but a low or long-term profit and another with low shared valued but high and short-term profit it's obvious which they're going to pick. It's still an inelegant way to help the world do what it needs to do. We really need to be putting that extra value at a higher, or at least at the same level as the profit.

And Porter suggested that investors are crying out for companies to do more of this, and talked about Larry Fink's letter to CEOs. But that wasn't received uncritically. Or look at the problem Paul Polman had at Unilever trying to get their investors to back that company's social approach.

It's why on balance, that for the workforce at least, I still prefer my approach based on the organisation value chain which I addressed in my last post. I like the way shared value sees people as an intrinsic good not just an instrument to achieve profit. But companies are only going to invest in shared value when it provides profit anyway, so this is a very minor distinction. And I think the organisation value chain helps companies understand the investments they need to make more clearly.

Part 3 of the post will focus on my press interview with Michael. Up next.

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Addressing wealth inequality

I hope you enjoyed my post and linked article on pay differentials.  I now want to focus on the broader issue I also referred to which is wealth inequality,  This may be a harder issue to impact as HR practitioners, as most of the increase in inequality is due to appreciating assets rather than high reward though I think I have a solution to this! - see below.

However I wanted to start with a few more thoughts on the issue.

Firstly I think the big issues, here, as with pay differentials, are trust and collaboration.  Today’s huge inequalities destroys the fabric of society and stops people working with each other effectively.

There are of course other issues too, particularly around economic inefficiency.  Very wealthy people run out of sensible things to spend money on.  So they keep more of their money, meaning that there is less in circulation, putting brake on the economy and reducing any trickle down effect (which is largely theoretical anyway.)  This keeps everybody’s wealth lower than it would be if the wealth was more evenly distributed.

But I still think reduction in trust and collaboration are more important problems.  I remember in Jaques Peretti's excellent BBC documentary on the super rich that a woman polo player was suggesting that concern about inequality in society is all down to envy and lack of understanding of how hard rich people work.  Well it’s true that there is envy.  We are human and part of what it means to be human is that we don’t always think positively about each other.  We should try to improve this.  But envy isn’t going to go away, it’s real, it exists and we need to manage society in a way that recognises this.  Huge inequality leads to many people being envious which isn’t a healthy or productive state.  We can’t tackle envy and therefore we need to reduce inequality.  The point about hard working rich people simply isn’t worth responding to.

In terms of how we respond to the issue, I support proposals made by Thomas Pikety and others to increase tax on wealth rather than just incomes.  However we are still left with the problems that many of the the rich don’t want to pay eg Griff Rees Jones threatening to move out of the UK if his pad in Fitzrovia becomes subject to a mansion tax.  The most repugnant thing I’ve seen on this was Lord Bell on Channel 4 News complaining that proceeds from higher taxation just ‘get wasted’ (waste presumably being anything that isn’t spent on him.)  This, together with the control that wealthy people have over society, means that no government, at least in the UK, is going to do much to change the status quo.

This leaves individual philanthropy which has obviously got to be encouraged.  The most important initiative in this area is the Giving Pledge, founded by Bill Gates and Warren Buffet and requiring wealthy individuals to commit to giving more than half their wealth away during their lifetime or in their will.  Some do even more eg Buffet has committed to giving away 99% of his wealth but he still uses an expensive private plane.  Gates does amazing work in philanthropy but still has a $150m house on Lake Washington named Xanadu 2.0 and owns a private island in Belize.  So whilst initiatives like this will have an impact they’re limited and long-term.

How then do create a fairer society - and do so before more people start to take up their pitchforks?

Well, the only way of making a difference that I can think of is to show the rich the way forward by demonstrating that we don’t value what they have and the way they’re living.  At the moment they hold onto their money because they think we’re envious of what they have and aspire to be like them.  No wonder they keep on doing what they’re doing.

Speaking personally for a moment, I have no desire at all to be super wealthy.  I see no advantage at all in having millions of pounds when other people are sleeping on the streets.  In fact some years back I committed with my wife that if I ever become a much more successful consultant or speaker than I am now, or my daughter becomes a pop star, or marries a football player, or we just win the lottery etc, that the first thing we’ll do is give away the excess amounts we don’t need (which we’ve set at the future equivalent of £5m in 2013 terms).

Given that wealth inequality is becoming ever greater and the issue therefore more and more important and also topical, with Barack Obama focusing on it in his State of the Union address; Mark Carney promoting inclusive capitalism; Justin Welby linking to to abuse and corruption; etc; etc; I thought it would be a good time to encourage other people - including you - to agree to follow the same approach.

I’ve therefore set this up as a change.org petition.

I somehow suspect this idea may not become massively popular - the current celebrity culture is just too strong for that.  But it would be nice if it could be more than just me and my wife!

So if you’re willing to, please go over there to and sign up to commit to give anything you generate over £10m (to give you a little leeway) to a better cause than just yourself.  It won't cost most of you anything, at least not yet!, and could potentially play a role in creating a more equal planet - and productive organisations too.

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Social Engagement

 

     I’ve already posted on Justmeans’ Social Media & Stakeholder Engagement conference this week.  Justmeans main focus is on sustainable business practice, and although the focus of this conference was a bit broader, this meant that the bulk of the people there were from CSR-type fields.

This meant that the debate on employee engagement was particularly multi-faceted, involving:

• Using social media to engage employees
• Using social media to engagement employees in sustainability
• Engaging employees in social media
• Engaging employees in sustainability
• Using sustainability to engage employees….

 

However, I think there’s also an opportunity for all of these different elements to link together (as indeed they did in the case study on Marks and Spencer’s Plan A, as well as Unilever’s Deo Lab / How Green am I?):

• Social media is becoming increasingly important in both employee engagement and social responsibility
• Employees need to be engaged to gain benefits from both social media and social responsibility
• Social responsibility provides an increasingly important basis for employee engagement (mojo) and enables more open, authentic conversations through social media.

 

Perhaps more organisations do need to focus on what might be called ‘social engagement’, with a particular focus on appealing to employees’ natural demand to bond.

Although the meaning of ‘social’ may be different in each of these areas, I think many issues that relate to one of these optics relate to them all.  For example, in his presentation, Bjorn Edlund ex-Shell referred to the social (responsible) competence of managers being lacking.  I think this refers to their competence in social media, and social engagement as well.

Just a thought.

 

 

See my posts on Social Advantage:

• More social media stories (from M&S, Shell, Unilev...
• Social media stories (from Virgin Media, Santander...

 

 

Technorati Tags: Social responsibility,social media,employee engagement,Justmeans

 

 

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Social media and employee engagement

 

   Next month (19th March, 2010), I’ll be moderating one of the sessions at Justmeans’ Social Media and Stakeholder Engagement conference in London:

Empowering Employees

Social media can inspire employees and generate new ideas when it is used as a collaboration tool.  Communication is no longer limited to a one-way delivery of information; organisations are participating in two-way dialogues and using social media to engage employees in innovative ways. How do you engage employees, create a shared vision, increase productivity and derive benefits from increased employee engagement? Many companies are increasingly concerned about the risks of social media and are reluctant to introduce it into their organisations.  How do you introduce and embrace the utilization of social media with proper planning and guidelines to ensure success and employee advocates?

 

Speakers for the session will include Tim Johns, VP Corporate Communications at Unilever and Ed Gillespie, Co-Founder of Futerra.

Should be fun!  Come along if you can.  You can book here or for more information, please contact Serina Mufti at smufti@justmeans.com or +44 (0) 203 238 2121.

And let me know if you’ll be there, or at least ensure you come over and say hello!

 

Technorati Tags: Justmeans,social media,stakeholder,engagement,employee,communication,conference,London

 

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Corporate social responsibility and the global reset

 

 

On Monday's Talking HR show, I spoke about how businesses need to prepare for the longer, as well as just the short-, term.  And I mentioned the World Economic Forum leaders' call in Davos for a 'fundamental reboot' of the economy.  This reboot will be partly structural, led by the 'global redesign initiative' to reform banking, regulation and corporate governance; and supported by other initiatives, such as Obama's curbs on executive pay.  But I think it needs to be largely cultural as well; it needs to be about a new way of doing business.

This point is coming through strongly from many different areas, including many / most? of the leaders at Davos.  But I still wonder how much things are really going to change.  There's almost as much push back as there is momentum forward.

Take this article on CSR by Stefan Stern at the FT.  Stern suggests that "now the recession’s here we can forget all that nonsense about corporate social responsibility (CSR) and get back to trying to make some money".

He describes my uncertainty about momentum and push-back as a "mismatch" between "politically correct rhetoric" and "the reality of what managers have to do every day of the week".  And he concludes: "we need to cut through the well-meaning waffle".

So in Stern's view at least, nothing's going to change.  We're just going to carry on with reducing levels of trust, happiness and engagement, and assume that organisations designed for the 20th century still do the job today.

I don't believe we're going to let that happen.  And I hope that there are enough CEOs and business leaders in the world who for their own sakes, and the sakes of their companies, as well as any progressive or humanistic principles they may have, will ensure that we don't.

Stern provides a couple of examples of the 20th century leader.  One is Terry Leahy, CEO at Tesco:

"In an article for the Daily Telegraph last week, Sir Terry let off steam about what he sees as the growing risk of over-reaction by governments and regulators in the current crisis. We risk losing sight of a few fundamentals: 'free trade in competitive markets, enabling individuals to pursue their own interests, and all within a clear framework of law,' he wrote. Do-gooders, whether they mean to or not, are likely to do bad.

Yes, he went on to say, the role of something called 'green consumption' could also play a powerful role for good, in cutting the use of carbon.

But it is obvious where Sir Terry’s priorities lie. In a lecture in the same week he told suppliers that they would be coming under increasing pressure to cut the prices they charge Tesco this year. How worried is Sir Terry by the thought that his suppliers may be forced into finding cheaper and potentially less environmentally friendly ways of producing their goods? Not very, would be my guess."

 

I do believe that CSR and more generally, the rebooted economy, need to be supported by more government regulation.  Tesco does need to be constrained before the whole of the UK is covered over in concrete and fake clock towers.  But both CSR and the rebooted economy also need to be supported by a real desire to engage.

Compare Stern's and Leahy's comments to those of Jeffrey Immelt, GE's CEO, speaking at the BSR CSR conference last year (on the video).  Echoing the Davos leaders' call for a 'fundamental reboot', Immelt notes that the current economic crisis represents a 'reset' - not just a part of the standard business cycle:

"The era of transparency; accountability for corporations; responsibility - is profoundly different today versus where it was even six months ago...  You've got the run the company with trust - compliance, governance and transparency...  a long-term dedication to people.  Companies need to stand for something - they need to be accountable for something more that just the money they earn..."

 

Immelt also suggests that "people who understand this will prosper in the future, people who don't understand that will be left behind".  I tend to agree - GE's going in my HCM fund, and Tesco's staying out.

 

Technorati Tags: Stefan Stern,hot air,CSR,Jeffrey Immelt,GE,BSR

 

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