Business resilience and reputation are increasingly dependent on purpose, character and values

Although COVID may not have made companies question why they exist (purpose), it has certainly focused the minds of most leaders on their broader societal responsibilities. Companies have been leaning over backwards to find ways of using their resources to contribute to the effort and to make the right societal response, and to seen to be doing so. “Doing the right thing and being seen to do the right thing” has been the mantra throughout.    

But that was when decisions, ironically, were easier and there were less trade offs to make. In a conversation recently, with a FTSE 20 group corporate comms director, he rhetorically asked:

 “COVID is posing some major existential questions for a number of companies – will the purpose stuff get pushed aside”?

This seemed a fair question, so over recent weeks I canvassed the views of a number of corporate affairs directors, as well as number of respected thinkers in this field, including, Loughlin Hickey (an advisor to A Blueprint for a Better Business), Mike Barry (former Director of Sustainable Business at M&S and author of Plan A) and Jenny Scott Founder Partner, Apella Advisors). These conversations all centred on purpose and “whither ESG”.

The general consensus of opinion is that the expectation and requirement of business to use its resources to address, or help solve, broader societal ills has been heightened during recent months - this has been coming for a while, but COVID has accelerated its progress from the margins to the mainstream.

And if you loosely define “purpose stuff” as both a purpose and a strategy and approach to the issues outside your immediate business world (ESG factors), along with all the stakeholders in your sphere of influence, then the link between this and reputation is now pretty evident for everyone to see.

There seems little doubt that the trend for companies to be appraised and judged by a different set of criteria has accelerated and the smarter ones grasped this right at the outset. This was aptly summarised early on by a corporate affairs director who told us:

“With the entire world operating in a way that is not business as usual, actions are speaking louder than words and we are conscious of the powerful link between treating our staff well and how in the future consumers and Government will remember those businesses that really stepped up to the plate”.

This crisis has underscored  the fact that that business, the economy, society/societal institutions and policy (and regulation) are all inextricably intertwined. It has demonstrated that companies are not stand alone institutions and that they exist within a broader societal ecosystem. And with that comes broader societal obligations and responsibilities and with those, ever greater expectations.  Mike Barry observed that: “employees and society expect companies to keep them safe, to look after their communities, to pay their taxes”.

The latter is bound to become a contentious issue, the tax payer having bailed out so many companies. The corporate affairs/comms teams of the tech giants may have their work cut out.

Overall the mood music has changed and you can be sure that the media will stay in tune and maintain the volume. Corporate behaviour will be scrutinised to the nth degree and there is likely to be some naming and shaming. No CEO wants that on their record.

So the reason that the “purpose stuff” won’t be pushed down the agenda is that companies will find it increasingly hard to prosper (access to capital, employee retention and attraction, new business etc) if they don’t identify the contribution they can make, and the purpose they can carve out, within this complex ecosystem. And then align it with strategy and culture.  As a Partner at a leading global communications consultancy said to me recently:

“Its just the way you have to operate in today’s world. A critical lens is being applied and you just have to get it right”.

The landscape is conducive to progress:

Other factors worth noting are:  

·        Stakeholder balance – addressing and serving the needs of all stakeholders (maybe not investors, but they have had primacy for a long time) – has naturally crept into corporate behaviour and action during the crisis. And stakeholder balance is at the heart of the concept of purpose.

·        Companies have learnt that if employees are treated with trust, respect and a genuine regard for their wellbeing and dignity (and communicated with in the same tone and spirit), that there is not only an engagement dividend, but a reputation dividend.  They have also seen that if you get this wrong, reputational damage can quickly ensue. This, as one corporate affairs director remarked to me, is “all powerful stuff”. Loughlin Hickey from Blueprint felt positive because, as he put it: “the way that good and instinctive companies, leaders and employees have acted has broken the myth that people look after themselves first”. 

·        The inequality of health and wealth has become magnified and brought into sharp definition by COVID. The sheer wrongness of this has fuelled and broadened the existing feeling of unfairness and injustice.  There have been calls from all directions (“Building back fairer”) for an inclusive recovery that helps address some of the pressing social issues of our time.

The limitations on government’s ability to address these concerns has been all too obvious and business has to be a partner in this. Smarter companies will see that there is opportunity as well as risk here. And there will be risk - it won’t take much in the way of perceived corporate greed or self-interest to fan these flames. Tin eared leaders beware.

·        Access to capital and funding. VC funding is increasingly focused on businesses that have a clear purpose and the right intent. Views are mixed about whether COVID has accelerated ESG’s journey to a mainstream driver of investor decision-making.

“It’s all rhetoric, they still don’t ask about it unless it is the ESG mob”.

Others believe that investors will inevitably perceive greater risk in companies that haven’t got a purpose that is clearly aligned with its strategy. An ExCo level and well informed corporate affairs director working for a leading investment manager opined that:

“Economics and ESG will align. Asset owners don’t want to put their money into something that carries a high element of risk”.

As well as greater opportunity, to quote Mike Barry

“Investors are taking a welcome interest in ESG issues but its still largely risk and reputation driven. Very relevant (Boohoo), but it will be replaced rapidly by a new narrative about business opportunity and marketplace disruption”.

·        The thinking and behaviour of future leaders has been potentially shaped by what has happened. Existing and future CFOs will be more likely to consider financial decisions from a reputation perspective and possibly, in time, within a purpose framework.

·        Black Lives Matter has put governance, as well as societal issues, back on the agenda.

“What are companies going to do about race? How are they going to get greater ethnic representation on their Boards”?

·        Environmental issues have temporarily taken a back seat. But everyone I have spoken to believes that they will soon be back.

“COVID has made people think more about the people part of purpose rather than planet side”.

Business resilience used to be judged by balance sheet and business model. Reputation was then added to the mix. Purpose, it seems, will soon become a key component of business resilience. A clear sense of purpose, a purpose which is not about profit, and which is clearly aligned to strategy, may become as important as the business strategy itself. After all a common sense of purpose is more powerful than a common sense of strategy. 

Reasons for scepticism

There are also sceptics amongst those I have spoken to. Some are concerned that the initial enthusiasm and intent will diminish as other issues become more pressing.

“There is a danger that the thinking time will go. It may need a coherent message from the CEO saying we need a rounded answer and that we are listening and acting”.

Others fear that companies and their leaders may revert to type. One former corporate affairs director I spoke to, who had witnessed the adoption of ‘purpose’ first hand in two companies, had this to say:

“It is fundamentally vacuous and insincere, particularly when leadership have total disregard for the values chiselled into the wall. No one gives a f**k if you are not hitting your targets.”

There is also a danger that companies continue to pay lip service to it, falling back on a fairly glib and meaningless purpose statement. “A slogan substituted for a purpose” to quote the FRC. Such statements can seem nebulous, contrived and retro-fitted - an obvious bolt-on and detached from the reality of work. They don’t provide “a common purpose that everything a company does stems from and something that provides a framework for decision making” to quote a corporate affairs director of a leading FTSE100 retailer. But it gets the purpose box ticked and the annual report requirement ticked and hopefully Larry Fink off their backs.

Although in defence of glibness, it is hard to keep purpose front of mind, so it does require some degree of over-simplification, hence the slogan. These statement can sometimes conceal a lot of thought and effort.

Sometimes the will is there, but not the understanding. According to the FRC, there is “a tendency to conflate mission and vision with purpose” although the better companies “clearly described their unique contribution to the market they operate in, their stakeholders and society at large”.

All of the above confirm the key issue here, which is that, as Jenny Scott stated, “it’s difficult”. That is why companies often get it wrong, shy away from it, or go for the easiest option – the glib purpose statement.

Purpose is a way of doing business, central to the operating model and the lens through which choices are made. It has to be threaded into every single business action and aligned with strategy and culture.  This is a huge task and, like culture change (which it is), not always attractive to those with short term horizons, who are more naturally drawn to the easier purpose statement option.

Ultimately there has to be a belief that there is an obvious and strong link between having a clear purpose and being a more successful business. As Loughlin Hickey said:

“Unless there is a clear business reason as to why it matters, then it won’t work”.

Many companies are now reviewing and revisiting their business strategy and business model, or will be soon, in light of the changes brought about by COVID. This presents an opportunity for executive teams, and Boards, to have a fundamental discussion around “why are we in business, what do we exist, why do we matter?” Maybe some companies will have discovered the foundations of a purpose by default rather than by design.

The role of Corporate Affairs in all of this

If there is one corporate function which should play a leading role in helping an organisation identify, construct, articulate and implement its purpose, it is corporate affairs/comms.

Whilst purpose has to be inward looking and grounded in origins, heritage and core competencies, no company exists in a vacuum and it has to be connected to the broader context in which a company operates, hence the phrase “a purpose beyond itself”. The corporate affairs function is the function that is best equipped to provide that context.

What corporate affairs does is ‘bring the outside world in’. It helps leaders understand a) what is expected of them by stakeholders and what the mood music is ‘out there’ b) how they are perceived, how they are landing and seen to be showing up. Only by understanding it can you influence it.

The function decodes the outside world for the leaders of the company and synthesises it into something that is meaningful, predictive and enhances decision-making. It is the one role that is critical to understanding, identifying and interpreting societal needs, changing trends etc. This relentless focus on the world outside enables the function to see, in a way that those that largely inward looking cannot, the contribution that a clear purpose (that is lived) can make to stakeholder support and trust, the quality of an organisation’s relationships and ultimately its reputation. Jenny Scott

“Purpose can give a company a firm reputation foundation, so that if you do mess up, you get the benefit of the doubt. That is because they (stakeholders) genuinely believe you are doing something trustworthy”.

The function has the skill set, the remit, the relationships and the nous (or it should have) that equips it to provide the contextual information, insight and intelligence that no other function can come close to.

Their understanding of the stakeholder ecosystem, the mood music, the political landscape, the media agenda, all of which are interconnected, is unmatched by any other function. Stakeholders have to be mapped, their weighting and influence understood and this is also a core competence of the function.

Companies will trip up, often very badly, if they don’t know what is expected of them by stakeholders, and why, and then fail to meet these expectations. Stakeholders who may have more influence than the leaders of the company think or are aware of. It could be construed as basic risk management, and corporate affairs has the important role of ensuring that what is expected of the company is understood by all.

The corporate affairs leader should be better informed (than any other senior executive) about the purpose debate, the ESG debate, the thought leaders and think tanks in the field, the output of these think tanks, existing empirical research, the position of the FRC on purpose, the leaders in the area etc. That knowledge should enable them both make a powerful and well informed case and to educate and make sure that the executive team fully understand what purpose involves and why it matters.  

Corporate affairs should be more motivated to find, if it does not already possess it, the data demonstrates the purpose can be a value driver. Jenny Scott believes that :

“There is a strong role for the corporate affairs director to make that link between purpose and employee engagement or purpose and reputation, using net promoter scores for instance. The data and experience/nous is in corporate affairs and it can flush out some surprising findings”.

Understanding the political and economic agenda, societal issues and needs, and identifying opportunities to align corporate resources and capabilities with both of these, again plays to the core capabilities of the function.  

We noted in our 2019/20 Watson Helsby Group Corporate Affairs Director survey that the corporate affairs leader is the person who has to get the buy-in of all of the ExCo, without which it will be impossible to embed purpose and get alignment across the organisation. It is also the function that can apply a critical lens to the credibility and relevance of the purpose, both externally and internally. 

The function helps facilitate the thinking process, the articulation and ultimately makes sure that is woven into the narrative and communicated effectively. The leader helps keep the executive team accountable, highlighting any disconnects between what the outside world, and employees, have been led to expect and the decisions or actions that are being discussed.

The corporate affairs leader should also advise the CEO on whether they should speak out on certain issues or remain silent. And not to say anything that could be construed as virtue signalling.

There are, of course, other critical actors in this process, including Sustainability (which often has a reporting line into Corporate Comms/Affairs – 48% in FTSE 100 Source: Watson Helsby 2019/20 FTSE 100 Group Corporate Communications/Affairs survey) and HR. But this 360 degree perspective that corporate affairs brings is so crucial and inimitable.