The Promise of Business to Society
Tim Mikhelashvili
CEO & Co-Founder @Amedea Pharma | Board Member | Chief, Business Development @StatiaBio | Host of Medical Affairs Innovation Olympics | Speaker | Writer | Host of @Alloutcoach Podcast and YouTube Channel
When I look inside the eyes of children, I see eternity. They reflect not just infinite hope, joy, and purity but also teach us the essence of our being to remind us to maintain the spirit of our childhood despite ageing or gaining knowledge and wisdom. Children's eyes represent the reason to fight for a longer, more peaceful, and meaningful life to expect by every generation to come after us. Among those of us who serve the healthcare system, we have witnessed so many advances in preventing, treating, and even curing some of the most devastating diseases. It is time to search beyond, however, as our ultimate legacy to the children of tomorrow will be to leave them a world in which they can expect to remain "children" longer and expect to live to an unprecedented age of 100 or even one day 150 and beyond. As our fields of aging and longevity research are converging to identify deep aging clocks, specific aging or geno-protective biomarkers, as well as to track immunosenescence with artificial intelligence and deep learning, such a lofty legacy may be well within our reach (Zhavoronkov A et al AI for Longevity and Aging Research, Galkin F et al. DeepMAge Clock: A Methylation Aging Clock Developed with Deep Learning, Zhavoronkov A et al DeepAge Clock: Emergence of AI Biomarkers of Aging and Longevity). Thus the only barriers to more smiling eyes of the next generations that yearn for light, wonder, and attention through shared experiences are the people, systems, businesses, and governments whose missions do not include a future legacy, who separate themselves from their responsibilities, and whose daily lives do not involve passing the baton. And before our efforts become concerted across organizations, the first step we must take is to simply imagine a brighter future amidst a fragile present, and the second to generate the momentum to create it.
Yet business longevity, unlike human life expectancy, has decreased over the past decades as the average lifespan of a publicly traded U.S. company has decreased from 67 years to less than 17 years today. After all, while many businesses that have outlived a human lifespan had mission and vision statements, business has become synonymous with brutality, competition, and profits to mark success for so many years that the pendulum is finally swinging back in the opposite direction. This is why I have become not only particularly sensitive to but inspired by the new trends of many emerging new businesses that identify themselves as socially responsible and carry various designations or seals, such as B Corporations (B Corps), social purpose corporations (SPCs), and low-profit limited liability companies (L3Cs). Such businesses are now recognizing their responsibilities to not only their shareholders but their society at large.
A couple of weekends ago, I discovered the "New Human Movement" YouTube Channel hosted by the incredible Management Consulting experts Gary Hamel and Michele Zanini, which featured an interview with a Dutch businessman, Paul Polman, former CEO of the global consumer goods giant brand called Unilever. Paul's ideas rekindled a strong sense of promise for the future generation in my mind, and I have selected to highlight his tremendous case study in this March issue of my InWeekend journal. Watching Paul describe the details behind how he transformed Unilever into a modern, socially responsible and profitable business to bring to life the often perceived impossible "miracle" of achieving both profits and purpose had the same impact on me as observing children closely during play, school, or expedition, while feeling like a child student myself who did not want the lesson to end. Paul had previously led the entire Western Europe business for Procter and Gamble (P & G), a consumer goods company well recognized for its tremendous culture of developing people's talent over time, and he led Unilever as the CEO during 2009-2019.
UNILEVER - History / Background
Lord Lever had started Unilever at the end of the 19th century. When he created the company he believed in what he called "shared prosperity" rather than "shareholder value" and guaranteed a 6-day workweek and generous pension plans. However, when Paul came in, the company was struggling in building shareholder value, had a dwindling turnover for the past decade that had declined from $50 billion annually to $38 billion. Thus, the company began cutting investments in employee development, research & development, headcount, brand spending, which could have ultimately lead to a sequence of spiraling events that may have in turn included share buy-backs, mergers, layoffs that may often halt the growth or viability of a business over the long term.
"BUSINESSES CANNOT SUCCEED IN A SOCIETY THAT FAILS"
First, when Paul came in as the CEO, he worked hard to earn his respect, which he realized did not come along with the title alone. And while meeting with colleagues from various parts and layers of the organization, he went back to the origins of the company and made sure to influence it through his vision and character which defined him and the kind of business he wanted to build. There are four fundamental elements of his vision he brought to Unilever.
Under Paul's leadership, Unilever rediscovered and built on its original purpose of making hygiene commonplace in Victorian Britain in which one out of two babies did not make it past the age of 1, to translate it into the mission of "making sustainable living commonplace" as the organization's mission in the 21st century.
SIX FACTORS OF THE UNILEVER TRANSFORMATION
1. SUSTAINABLE LIVING PLAN
Paul worked directly with the management and frontline workers across different countries to initiate a new, long-term, multi-generational Unilever Sustainable Living Plan. First, it required investment in the company's total impact on the world. In the food business, this meant investing and taking responsibilities in deforestation, livelihoods of poor small farmers, food waste, and obesity.
As he reminds us, only 20% of the companies around the world have committed to slowing down global warming below 1.5 degrees Celsius in accordance to the Paris agreement despite knowing the enormous costs and potential risks to the future of humanity.
These trends once again reflect what Paul calls "the lack of multi-generational thinking" among leaders. Secondly, the company had to be run for all stakeholders rather than one at the expense of others, where the shareholder return became the result of what Unilever did, not the objective of its mission. Thirdly, Paul created 50 time-bound company targets across 3 overarching categories:
As a result, during Paul's leadership, two million people applied to Unilever every year, the third highest after Google and Apple, 75% of whom submitted their resumes due to the Unilever's Sustainable Living Plan mission as people realized the organization's mission extended far beyond profits.
2. ELIMINATION OF SHAREHOLDER DRIVEN "SHORT-TERMISM"
Paul recognized that Unilever had become the victim of "short-termism" and started "chasing the tail". Asked by Gary Hamel and Michele Zanini to propose a potential root cause for this phenomenon, Paul attributes this trend of increasing accountability to shareholders to the liberalization of financial markets in the 1970-80s which allowed banks to create many more financial instruments chasing results and led to all industries becoming subservient to the financial markets. This trajectory explains a 3-fold shorter life spans of publicly traded businesses in the U.S. over this period. Paul believes that after a model of business growth in which too many people feel excluded or are not getting equal opportunities, the employees that make up an organization will ultimately invariably rebel against its own system. He then cites back a turning point in history when President Roosevelt bent the curve of capitalism in the 1930's by inclusion of social security, safety network with healthcare which resulted in an economic boom. The same bending the curve of capitalism is still needed today, according to Paul, who believes that the first and most likely to accomplish this transformation is the business community rather than political governments.
Regardless of the industry, we learn to grow accustomed to another expression of corporate "short-termism" called reorganization pretty quickly. Reorganizations in most businesses take place every 3-5 years, if not more often.
Yet Paul avoided reorganizations for his entire tenure at Unilever.
As Paul states, "It is more difficult for CEOs to make the harder decisions. As a result, leaders today choose not to have those tough, courageous conversations."
A reorganization is the result of the lack of courage to make the right decisions when you need to make them.
-Paul Polman
So the CEOs learn to act "appropriately" to appease its spectators of the game of business for 5-7 years, create the right perceptions, link the game to incentive systems and shareholder systems and value. And ultimately, he believes many get away with failures or short-term motives and then disappear. The average tenure of CEOs is now down to 5 years, so the next CEO enters, starts to restructure the organization, writes it off and surprisingly gets a positive short-term response from shareholders. Paul says in the interview, "We simply do not know how to create the right leaders."
As Gary Hamel presses Paul to elaborate to explain why we are missing leaders today Paul provides quite a candid response. He says, The Business School curriculum in today's MBA program is "Milton Freedman on steroids and requires a complete transformation." As a result Polman indicates the need to shift away from the current outdated focus on maximizing return on financial capital rather than social or environmental capital. "We have let norms creep into society that drive the wrong behaviors - that the duty of the board is to protect the shareholders." In fact, Paul shares critical statistics demonstrating that
75% of CEOs believe the short-term pressure comes from their boards not from their shareholder community.
Too many leaders play not to lose rather than to win by choosing objectives they get full agreement on or those they can achieve even if they are not sufficient for society.
RESULTS OF A LONG-TERM MULTI-GENERATIONAL APPROACH vs. "SHORT-TERMISM"
Ultimately, Paul's vision and initiatives over 10 years led to
3. DIVERSE AND INCLUSIVE BOARD OF DIRECTORS
When Paul came to Unilever he had noticed the Board of Directors consisted solely of Dutch and British nationals, which did not quite represent the employees or the stakeholders. Thus, he changed the Board to which he introduced diversity and inclusion with the long term goals of increasing equality, engagement, and productivity.
He admits that one of the saddest and consistent statistics he sees across all the latest statistics globally is that only 15% of all employees truly feel engaged at work, and I share his frustration after closely studying these latest trends based on published research and interviewing many executives and recognized organizational change experts in my pharmaceutical industry as well as others for my Alloutcoach podcast. Paul says that most people live by a different set of standards in life compared to work which causes unnecessary stress and anxiety, and is not the best way to get the most out of your employees. Interestingly, he points out that based on his experience at Unilever while the vast majority of the management feels their purpose is fulfilled, it is almost always the frontline, rank and file employees who drive most of the ideas that define purpose for the organization, rather than the management.
When I started working with tremendous doctoral-level PhDs, MDs, and PharmDs in the pharmaceutical industry at global companies working on mainstream products with highest prescribing medications as our primary competitors, I had the full intentions of staying in one company for my entire career and to this day admire those who have been able to do so. But over the years I learned to reinvent myself at different stages in a consistent manner with the environment to change teams and organizations, as I closely observed just how dramatically job engagement, internal training, employee development, and retention have steadily decreased over the past two decades.
As we examine the last few years since the pandemic that has given rise to the popular phrase "The Great Resignation" that has emerged, I have instead referred to it as "The Great Revelation" of the critical errors in management which our executive level leaders must consider seriously. Let me explain. Most statistics you will come across demonstrate that the majority of people ranging from 2/3 to 3/4 of those surveyed now prefer flexibility at work, yet as the social isolation and COVID restrictions are being drastically lifted, the business owners and executives are urging their employees to come back to their home offices, now supported by most local and federal governments. Yet the popular preference to choose to work remotely if possible, in my opinion, does not only reflect that we have learned to be more productive by working virtually and have embraced technology, but it also partly underlines a huge difference between the perception of purpose and belonging that continues to exist between most frontline workers and business owners or executives. Because after all, no matter how productive you have been, if you felt like you fully "belonged", "were included", or a part of "a family" or "friends", would you not run back to the office to give the people who share your feelings a hug and choose to collaborate in person? On the other end of the token, if you are an experienced executive that values all your employees and truly considers their opinions in your decisions, I am convinced you would certainly find a way to manage not only their work but their various aspects of life throughout pandemics, disasters, or worse because you also inherently believe that they truly belong to your team. Thus in addition to the final signs of "The Great Resignation" we may read about or experience, we must also examine its root cause to learn what its "Great Revelation" that reflects our leadership truly indicates.
The gaps in job engagement constitute a global phenomenon not limited to the United States, which Gary Hamel supports during the interview with some of the most recent data from European companies shown above. These gaps outline tremendous needs in improvement in continuous training, diversity and inclusion, incentive-based compensation, autonomy known to increase goal achievement, and strategies intended to increase innovation or ideation.
Fortunately, at Unilever, Paul contributed to 85-90% engagement scores from its employees, increased a sense of belonging, decreased the distance in communication between management and frontline employees to stimulate ideas to drive purpose and fulfillment from where it counted most.
4. ONE TRANSPARENT LONG-TERM COMPENSATION PLAN FOR ALL
Even the best organizations experience gaps in collaboration and inter-divisional rivalries that may develop due to misaligned policies, irrelevant or imbalanced incentive systems, metrics, and tolerance of inappropriate behaviors due to organizational culture that prevails or scatters. Paul made everyone at Unilever a shareholder and created one, fully transparent single compensation system for all employees, though at different levels in accordance to grade or hierarchy. He cites research showing that 78% of all U.S. corporate incentives are short-term in public companies. Yet Paul is fully convinced that metrics and compensation plans should be long-term.
Importantly, he made ratings and rankings fully transparent including performance reviews which tremendously helped his credibility.
领英推荐
After analyzing all the brands in its pipeline, Paul
Paul admits that he did not achieve all of his objectives at Unilever. It had taken the company 100 years to achieve 10% sustainable sourcing. When he left the company it had 80% sustainable sourcing. The organization created 3 million new jobs for small holder farmers, not 5 million. The company reached 1000000002 people which matched the projected 1 billion while it had taken 50 million people in the last 100 years. Thus, while not all the objectives were met and some people were cynical of Paul's Sustainable Living Plan, he absolutely transformed the organization and left it in better shape than when he came in.
Paul openly admitted he was paid what he considers is "too much" as a CEO even though he never increased his salary throughout the 10 years of his leadership.
As Gary and Michele share some of the latest labor statistics from McKinsey and others during the discussion demonstrating a disproportionate increase of the ratio of CEO to front-line pay in the U.S. since 1965, Paul highlights data showing that similar to the trends shown above, the compensation of CEOs in the U.S. increased during COVID when most people have suffered more than ever before.
While productivity has increased consistently over the decades, the average compensation since the 1970's has not grown correspondingly.
Focusing on a more recent period since the 1990s, Gary and Michele demonstrate more data expressed as percentage wages versus profits of Gross Domestic Product (GDP) to emphasize a large gap in the distribution of capital indicating an overall increase in profits and a decline in wages over this time period.
5. DECREASED HIERARCHY FROM 11 TO 5 LEVELS
Paul flattened the Unilever organization from 11 to 5 hierarchy levels. He shortened the chain of command and decreased friction points systematically. As a result, the business accomplished reducing the distance between departments, employees, markets, countries, ideas and actions. The transition increased potential opportunities for employee development and mentorship, both on a formal and informal level.
6. FEWER "INTERSECTIONS" BETWEEN EMPLOYEES AND DEPARTMENTS
He updated policies, stimulated cross functional team collaboration, which increased clarity of decision-making. Paul created a more clear collaboration model between the global and local divisions of the company.
WHY SOCIALLY RESPONSIBLE BUSINESS IS HERE TO STAY
Traditional approaches to businesses are becoming outdated quickly. Therefore, Paul calls for the need to update our economic systems to those that do not just reward capital alone due to the growing gap between our actual business environment at the time and our society's needs that only socially responsible organizations can address. His explanation for the reason our economic systems no longer work is quite simple, quoted below.
Our economic systems were designed at a time when resources were abundant and capital was scarce. Now we have abundant capital but scarcity of resources.
As a result, Polman suggests we must put a price on these scarce resources and reward labor. Tax laws will have to change. The market is becoming more concentrated. Social safety nets will have to change. Here are some striking statistics Paul shares in this interview to serve as serious reminders that address all of us world citizens in some manner:
HOW TO PERSUADE LEADERS TO AIM FOR PROFITS + PURPOSE
As we embark on a journey to replicate what Paul accomplished we must recognize that moral factors will not drive business behaviors, but as he suggests, those that can link social responsibility to improved economic performance will be more likely to become successful. For example, we must demonstrate that a more diverse organization performs better. A company that is less carbon-independent performs higher. A business that works human rights into its value chain or has better relationships with its communities performs better. A list of businesses in the Russell 1000 in the U.S. - those that run on a longer-term multi-stakeholder model, demonstrates that it outperforms its peer group by 40 percent.
Thus, thinking ahead, to persuade leaders to bring the miracle of reaching profits and purpose into reality, Paul asks us to consider the following three arguments to highlight.
THE 20-25% TIPPING POINT THRESHOLD TO INSPIRE CHANGE
While social responsibility starts regardless of consensus and requires moral courage, the magic threshold to reach a tipping point to scale this long-term approach is a critical mass of 20-25% of the responsible part of the industry, according to Paul. And he believes achieving this percentage is now possible for most industries together, because you can then stimulate "a civil society who wants to join, governments that start to listen, de-risking political process and move issues forward can drive tipping points to allow them to become more courageous collectively to possibly transform political systems and other institutions." Unilever focused on fashion, food, tourism, travel, and the finance industry. It looked at the companies that are leaders with the biggest impact on Sustainable Development Goals. As a result, in fashion, 70 companies are collectively eliminating single-use plastics, moving to regenerative cotton, collectively moving the industry closer to the Paris agreement of less than 1.5 degrees Celsius warming.
Thirty of the biggest food companies across the value chain recognize that using fertilizer is a highly carbon-emitting process, and now some use a green fertilizer which uses hydrogen, a much more expensive method that puts farmers at a disadvantage. Yet Paul says that "if you know it is only 1 cent on the end product, then you can work with trust across the value chain to solve the dilemma." Ultimately, Unilever is moving the entire agricultural industry to regenerative farming.
Interestingly, Polman has some promising developments to share. Unilever, Nestle, and Dannon have agreed to be at Net Zero including on scope 3 where most of the emissions are which is quite encouraging. Franz Timmermans of the European Union is working on the European Green Deal - "from Farm to Fork" package and the "Biodiversity package". And as Franz has stated, for the first time "he can talk to the entire industry around labeling and come in with one scheme, perhaps a compromise for everybody but better than our old systems - an example of a courageous collective."
As I closely observe the amazing new generation of healthcare professionals, business people, entrepreneurs, and students, I am absolutely in awe and remain hopeful for our future because of how much more refined they are in their skills than I ever thought was possible at such an age, and about how fervently they are fighting for their purpose and the issues they are raising of social responsibility, health equity across business, healthcare, and beyond. They are leading a huge transformation and need our hand in return for support.
In essence, the next generation is reminding our society to reflect by looking at the world from inside children's eyes.
Only through reflecting on our world through the eyes of children can we lose our assumptions and begin to learn, teach, and collaborate across generations, industries, and institutions. It may seem too difficult to do at first, but I assure you based on my experiences in reconnecting with next generation student leaders, that we will even feel younger in the process of such an exchange. And when we succeed in changing how we see and think, we can help navigate the cultural transformation of leadership which our environment and next generation has already started in the right direction!
Remember, it was not genius or some irreplaceable talent that the most celebrated artists, architects, poets, philosophers and sculptors had during the Renaissance, but it was the vision for the purpose of what their work was intended, which was far beyond art itself. They created new science, philosophy, and art in order to revive and redefine history, and were commissioned by financial moguls such as Lorenzo De Medici to promote the values of truth, beauty, and wisdom that suddenly became public for people to share and enjoy openly, and no longer remained private. Though difficult to imagine, perhaps our financial markets should invest more of their resources into philosophers such as Paul Polman who are genuinely concerned about the future of society at large similar to the Renaissance from centuries ago. And as a result, the works from the Renaissance and the cities built during the period are still unsurpassed to this day in many regards, as the driving force of their movement was larger than their products - their ultimate purpose (listen to this short podcast episode of why we need to view our world today from the Renaissance artists' eyes from centuries ago).
Paul is an example of a new age humanist and a rare leader who shares timeless lessons that connect and inspire all of us across the flags we wave and countries we support. Learn more about his case study by watching the lively 1 hour 22 minute discussion on "The New Human Movement" YouTube Channel and connect with its hosts, the incredible Gary Hamel and Michele Zanini, my dear friends and fellow "new age humanists of 2022"!
Connect with me on LinkedIn and subscribe to my Alloutcoach YouTube Channel and podcast to generate new conversations that we can use to share the ideas that can inspire a more meaningful future.
Paul Polman published his book titled "Net Positive: How Courageous Companies Thrive by Giving More Than They Take" in October 2021. He defines A Net Positive company as one that takes responsibility of all the consequences intended or not, which it directly impacts and uses a multi-stakeholder approach to operate its entire organization in a manner that is sustainable.
He concludes that "it is a social enterprise that stimulates a movement which describes how successful companies create solutions rather than problems, and the competition in which they ultimately participate is in the extent of trust they can earn from the members of our society".
I hope you enjoyed the third, March issue of "InWeekend" - post your comments, questions, and reshare this newsletter with your friends and colleagues who may find it valuable! Contact me directly to submit topics, ideas and suggestions for future issues.
Thank you for your attention!
Best Wishes for Peace, Health, and Happiness!
Tim Mikhelashvili