How to win by doing good

The past 9 months have seen quite a rollercoaster in the tech industry. We have seen staggering profits, we continue to see stock buybacks, we have seen consolidation, mergers and acquisitions – and we have seen mass layoffs. Few of them were well handled or communicated. Even fewer showed any sign of executives taking accountability besides stating that they made mistakes during the pandemic and that they feel sorry for what they need to do now. They had simply over-hired and now need to take corrective action to stay on a ‘growth path’. One of these executives arguably took the prized company culture of regarding the employees as family to grave.

What do these layoffs have in common? They were initiated to please the capital markets, i.e. shareholders and venture capitalists. The idea behind this is that layoffs is the fastest way to solve or avoid impending financial problems. However, there is mounting scientific evidence that this idea is a myth, as e.g., expressed here, here or here as summaries. There is often no financial benefit, even not after 3 years; instead, some scientists look at these layoffs as “the result of imitative behaviour [that is] not particularly evidence based” and that there are other, better ways that businesses can pursue.

But, as Raju Vegesna says “customers are inherently loyal, employees are inherently loyal, investors are not. Yet, businesses are most loyal to this least loyal group of stakeholders”.

Ouch!

One of these better ways

And, indeed, one company that pursues other avenues is Zoho. Zoho CEO and co-founder Sridhar Vembu pledged that there will be no layoffs for economic reasons, no matter what.

But this isn’t all. Vembu’s pledge is rooted in a deep belief that permeates the corporate culture. The belief is that doing good to the communities that surround a business does not harm business. On the contrary, it is good for business. As a company, one cannot only sell to people, one also needs to buy from them. Else, the selling will no more be possible over time. Zoho does this by setting up presence in rural areas that are underserved, underserved with education and opportunity. Why opportunity? Because people in rural areas usually are at the beginning of the value chain, which is where least of the profits of the value chain remain. The starting idea is two-fold: Firstly, bring education to where the people are, which is in rural areas, instead of making people move into metropolitan areas. Secondly, cut out the middle men, so that people at the beginning of the value chain are able to make a living. Cutting out middle men works in business operations and services, too. It means insourcing instead of outsourcing.

Doing all this is a job that businesses can and should do, as they benefit from it.

I really like this thought, having been brought up in Germany.

Why does this matter, you might ask. It matters, because this belief is also rooted in the German constitution.

Article 14 paragraph 2 of the German constitution says: ‘Property is an obligation. Using it should serve the public good at the same time.‘ This is a very good commandment and far from being socialistic.

Unless you want to consider Germany a socialist country, that is.

Zoho invited me as a member of a group of fellow analysts to a week-long immersion into its corporate culture, Truly Zoho, to show us that this is not lip service.

The proof is in the pudding

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