Strategy For Leading In The New Era Of Awakened Stakeholders

It wasn’t too long ago when businesses believed that one could either have sustainability or profit, but not both. Driven by the logic of profit, they baulked at the extra cost of maintaining sustainable business practices. Nudged hard enough, many try to make do with token gestures, and “thoughts and prayers”.

Responsible investing is widely understood as the integration of environmental, social and governance (ESG) factors into investment processes and decision-making. ESG factors cover a wide spectrum of issues that traditionally are not part of financial analysis, yet may have financial relevance. This might include how corporations respond to climate change, how good they are with water management, how effective their health and safety policies are in the protection against accidents, how they manage their supply chains, how they treat their workers and whether they have a corporate culture that builds trust and fosters innovation.

"ESGs and stakeholder capitalism are not a fad. It's not a manifestation of business leaders to showcase their corporate social responsibility. ESGs are an integral part of business management," Schwab said in the call hosted by Diligent Corporation.

The Need For A New Corporate Strategy

Even before the COVID-19 pandemic, and the resulting collapse of much of the world’s economy, a crisis in capitalism was plainly evident. Unfettered free markets had pushed inequality of income and wealth to extremely high levels. Slow productivity growth in many rich countries had stunted financial opportunities for a generation. Businesses, if no longer quite oblivious to global warming, seemed impotent to make changes that might slow it.

And then came the pandemic, with millions losing their jobs, and then the raging wildfires, fueled by climate change, that blazed up and down the US West Coast. All the simmering signs of a dysfunctional economic system suddenly became fully evident, full-blown disasters.

Many in the developed economies have begun questioning the underpinnings of capitalism—particularly its devotion to free markets and its faith in the power of economic growth to create prosperity and solve our problems.

“You can churn out all the GDP you want,” says Rebecca Henderson, an economist at Harvard Business School, “but if the suicide rates go up, and the depression rates go up, and the rate of children dying before they’re four goes up, it’s not the kind of society you want to build.” We need to “stop relying totally on GDP,” she says. “It should be just one metric among many.”

The antipathy to growth is not new; the term “degrowth” was coined in the early 1970s. But these days, worries over climate change, as well as rising inequality, are prompting its reemergence as a movement.

 “And all you can talk about is money and fairy tales of eternal economic growth. How dare you!” thundered Greta Thunberg, to an audience of diplomats and politicians at UN Climate Week last year.

Strategy 4.0 - A New Strategic Planning Model

Leading in the new era of awakened stakeholders requires a refreshed strategic planning model that focuses on the synergies between Culture, Sustainability, Social Impact and Resilience. A successful strategy will intuitively connect Our Organization, Our Livelihood, Our Community and Our Environment in the minds of stakeholders. This model will align a new set of Strategic Imperatives to a company’s Core Business.

Culture As A Strategic Pillar

Traditional leadership doesn’t cut it anymore. Today, business success relies on exponential leadership and everything that it embodies, such as openness, engagement, continuous learning, creative problem solving and a growth mindset. Significant achievements are possible when these values are present everywhere from leadership to work culture.

Strategy and culture are among the primary levers at top leaders’ disposal in their never-ending quest to maintain organizational viability and effectiveness. Strategy offers a formal logic for the company’s goals and orients people around them. Culture expresses goals through values and beliefs and guides activity through shared assumptions and group norms.

Leading With Culture

A company rewards itself when exponential leaders align culture with strategy. Culture must ripple through every act of policy and business strategy because legacies, reputations and greater responsibilities depend upon what lies beneath the numbers that workers crunch.

When a leader signs the company name to a new contract or product, culture must be at work. When the company offers perks, benefits and feedback, culture must be at the heart of it all. Strategy goes nowhere without culture, and exponential leaders realize this.

Many businesses forget the importance of culture and put strategy first. Perhaps they think culture takes care of itself, but that’s not the case.

Company culture means taking care of each other to do more for the world with your services and products.

Culture And Engaging Our Future Workforce

For years, employers have been aware of employee engagement and retention issues in their workplaces. These organizations have engagement policies that typically address engagement for the organization under one policy, without any differentiation for the generations of employees. As the millennial generation grows in the workforce and baby boomers retire, managers and human resources professionals will need to develop new engagement models to embrace the generational differences between baby boomers and millennials.

Baby boomers are currently the largest generation of active workers. Research has shown that boomers identify their strengths as organizational memory, optimism, and their willingness to work long hours. This generation grew up in organizations with large corporate hierarchies, rather than flat management structures and teamwork-based job roles.

Millennials have a drastically different outlook on what they expect from their employment experience. Millennials are well educated, skilled in technology, very self-confident, able to multi-task, and have plenty of energy. They have high expectations for themselves, and prefer to work in teams, rather than as individuals. Millennials seek challenges, yet work-life balance is of utmost importance to them. They do, however, realize that their need for social interaction, immediate results in their work, and desire for speedy advancement may be seen as weaknesses by older colleagues.

As Leigh Buchanon writes in Meet the Millennials, “One of the characteristics of millennials, besides the fact that they are masters of digital communication, is that they are primed to do well by doing good. Almost 70 percent say that giving back and being civically engaged are their highest priorities.”

Employer Reputation As A Strength

Employer reputation is the most frequent engagement threat. This suggests that highly engaged employees are proud of the organizations they work for. When perceptions of employer reputations decrease, a similar decrease in engagement spreads throughout the workforce.

Engaged employees are emotionally attached to their organizations, and when employer reputation changes, so do relationships of employees with employers.

Creating engagement strategies is one of management’s big goals. But leaders who have developed successful strategies for retaining boomers are going to have put those strategies in the corporate archives. Creating strategies to engage millennials requires a whole different approach and strategy.

Environmental Sustainability Strategy

Environmental sustainability strategy identifies environmental risks, lessens conflict by promoting community participation, minimizes adverse environmental effects, inform decision-makers, and help lay the base for environmental-sound projects.

To implement an environmental sustainability strategy, leaders must measure the environmental impact of their organization. The first step is to collect environmental data about critical workplace assets, including energy consumption and emissions data.

Organizations need to become a key support tool for sustainable development. They must effectively contribute to sustainable development, and they need to show that they can contribute to poverty alleviation, employment creation and improved economic development.

Creating sustainable value and enhancing market performance has never been more challenging. Any company with a purpose, needs to integrate sustainability into the company’s core strategy with the intent of extending its radius of responsibility beyond the immediate benefit of doing long-term good. 

The Role Of Leaders In Shaping A Sustainable, Profitable World

Building a profitable business is a challenge, and running a sustainable business can be tough, but if leaders rethink and re-imagine possibilities, we can achieve anything.

It is amazing to see how far technology and multinational corporations have already transformed business. All leaders need now is to translate the traditional vision of “business profitability” to one of “broader social impact”.

Today’s leaders are faced with an incredible opportunity to carve out a new future for their businesses by importing the principles of sustainability into their strategy. Amid this growing focus on people, planet, and profits, the onus lies with the business leaders to figure out the right balance between short-term and long-term priorities to create enhanced value for stakeholders.

The Age Of Corporate Social Justice

Research has shown that companies with effective Corporate Social Responsibility (CSR) programs are more profitable than those that aren’t. Corporations have relied on these programs, which include social issue marketing, philanthropic efforts, employee volunteer initiatives, and diversity and inclusion work, to build their brands and satisfy customers.

Now, consumers and employees are raising the bar. Consumers and employees are now looking for more than Corporate Social Responsibility — they’re looking for Corporate Social Justice.

Corporate Social Justice is a reframing of CSR that centres the focus of any initiative or program on the measurable, lived experiences of groups harmed and disadvantaged by society. CSR is a self-regulated framework that has no legal or social obligation for corporations to actually create positive impact for the groups they purport to help. Corporate Social Justice is a framework regulated by the trust between a company and its employees, customers, shareholders, and the broader community it touches, to explicitly do good by all of them. Where CSR is often realized through a secondary or even vanity program tacked onto a company’s main business, Corporate Social Justice requires deep integration with every aspect of the way a company functions.

When picking a goal or vision, don’t just go with a goal that your CEO likes. Vanity projects aren’t enough.

Instead, develop a thoughtful and intentional process that brings together representatives from your various stakeholder groups to determine which issues lie at the intersection of your company’s mission and the unmet needs of its stakeholders.

The objective of this exercise isn’t to arrive at a goal that sounds impressive. It’s to arrive at a vision that your company is best equipped to play a part in creating.

A "Woke-Tweet" is no longer enough! Be the change you want to see in the world. Don’t just tweet the change you want to see in the world.

What all this means for the future of capitalism is unclear, since the entire basis of the capitalist system is the expectation that economic actors will act on self-interest (broadly defined to include the long-term benefit of healthy relationships with stakeholders) while the government and civil society tend to needs that can’t be (or aren’t) served by market forces.

Modern corporations have generally leavened their profit-seeking activities with at least some regard for business ethics. But it was always taken for granted that these ethical concerns acted in constraint on the principal mission of the corporation—and this mission inspired a unique path for the company to take that would ultimately enrich shareholders.

What’s different now is that the current strain of social-justice ideology presents itself as a totalizing creed—which means that it isn’t enough for CEOs to accede to the idea of social justice as a mere boundary check on the company’s profit-seeking activities. Social justice must now appear to be at the center of corporate operations

Technology For Good

The development and adoption of advanced technologies including smart automation and artificial intelligence has the potential not only to raise productivity and GDP growth but also to improve well-being more broadly, including a healthier life, longevity and more leisure time. Alongside such benefits, these technologies also have the potential to reduce disruption and the potentially destabilizing effects on society arising from their adoption.

Evidence suggests that good outcomes for the economy overall and for individual well-being come about when technology adoption is focused on innovation-led growth rather than purely on labor reduction and cost savings through automation.

This needs to be accompanied by proactive transition management that increases labour market fluidity and equips workers with new skills.

As in previous periods of technological innovation, these technologies may also have perverse effects that will require preventive or counteraction, such as AI being used unethically. More everyday negative impacts may also prevail.

Technology can boost labour productivity but also make work environments more intense and, in some cases, lead to high levels of stress.

Moreover, like historical technology transitions, the current wave may bring with it significant workforce dislocations, rising income inequality, and pressure on middle-class jobs.

Technology Powering Equal Access To Healthcare

Technology has significant potential to improve health. The possibilities range from AI-powered drug research, which is pushing the frontiers of drug discovery, to personal lifestyle wearables that can help individuals monitor their health and track improvements.

Technology can also ease access to health, including through telemedicine, and create new efficiencies and reduce waste in healthcare systems, whose rising costs are increasingly affecting living standards and putting pressure on public finances in some countries.

AI already shows results in applications ranging from diagnosis of pneumonia, malaria, or Alzheimer’s to prediction of strokes and heart attacks, or of autism in infants. Robotics, meanwhile, has potential in surgery. In the case of epidemics, advanced analytics and predictive models can help identify transmission routes and prevent transmission in the most efficient way possible.

At a personal level, lifestyle wearables and fitness trackers could contribute to improving health for many individuals and help healthcare professionals monitor patients continuously—for example by providing blood glucose readings—remotely.

Finally, technology can be an important tool for improving public health by bringing greater efficiency to complex health systems.

Technology Democratizing High-Quality Cancer Care

Advances in cancer biomarker, personalized drugs, targeted immunotherapy, precision radiation therapy, stereotactic radiosurgery, and robotic surgery are helping to redefine ‘state of the art’ in cancer care today. The rapid development of integration software systems and solutions enable leading cancer treatment centers, academic research institutions and community oncology practices throughout the world to provide integrated, multidisciplinary care with the patient as an active member of their care team. Private companies and public institutions must work in building an ecosystem of cost-effective products and services designed to help solve the biggest problems facing the global cancer community.

There are no "Bad Guys" in our pursuit of high quality and cost effective healthcare for more. With technology there is no longer a need to accpect trade-offs. Hence, it is paramount that private companies and public institutions work together in building an ecosystem of cost-effective products and services designed to help solve the biggest problems facing the global cancer community.

Strategic Stakeholder Resilience Built-in

The world is becoming turbulent faster than organizations are becoming resilient. Strategic resilience is a characteristic of a progressive, robust pursuit of an opportunity in a competitive environment so that the exploration contributes to the organization's capability to adapt to change without requiring or resulting in a financial or other crisis.

Resilient organizations have created flexibility—a safety buffer. They did this by cleaning up their balance sheets before the trough, which helped them be more acquisitive afterwards. They cut costs ahead of the curve. There is little evidence to suggest that they were better at timing the market. However, it is quite clear that they prepared earlier, moved faster, and cut deeper when recessionary signs were emerging.

Resilient organizations appear to have focused primarily on operational effectiveness, reducing their cost of goods sold, while maintaining selling, general, and administrative costs roughly in line with sales.

Resilient businesses in countercyclical sectors focused on growth, even if it meant incurring costs. In the last recession, demand for healthcare and pharmaceuticals proved relatively inelastic. For this sector, the rule book was quite different. Resilient companies in healthcare actually over-delivered significantly on revenue, while taking on higher costs.

Customer Resilience

The idea of customer resilience forces us to look at our operations in a different way. When things go wrong, we need to put the customer at the forefront of our thinking and recognize that business as usual is about identifying the critical customer functions and working together to ensure their operations are not disrupted.

When major events happen that could ultimately lead to recovery plans being called into play, what is important is the experience we deliver to customers. In these situations, the priority is not how efficiently and effectively we can get all aspects of our business back up and running, but how we maintain the service our customers expect and ensure our people can operate in a safe environment. For example, if customers need access to their accounts online, what is important to them is how swiftly we can get them back online to view and interact with their information.

Traditional resilience models focus preparation on external events, like natural disasters and weather-related impacts to physical buildings; paying little attention to economic, social, digital, cyber and biological disruptors.

What is less understood and often overlooked are other events that threaten to disrupt everyday business operations and the customer experience. More than ever, customer data and corporate intelligence are vulnerable to external disruption. The top threats moving forward are a cyber-attack or data breach, followed by system outages.

Employee Resilience

Given turbulent economic times, the concept of employee resilience is receiving increasing attention in many organizations. A coherent set of resilience‐enhancing HR practices have the potential to contribute to employees’ psychological capital, attitudes and behaviour, and to organizational performance not only in turbulent circumstances but also during periods of relative calm.

Employee wellness needs to reflect this all-encompassing definition of health. Employee resilience is one wellness issue that, in recent years, has come to encompass both physical and mental health territories.

Given this theoretical framing, formal resilience training should be viewed as a single component of a broader, coherent set of resilience‐enhancing HR practices.

There is a need to lead by example and build resilience at the leadership level. The resilience of the management team will resonate among employees. It’s important to ensure corporate leaders adopt a sense of personal resiliency in the workplace.

It is also critical to foster a sense of purpose by encouraging employees to find meaning in the work they do. When employees have a line of sight from their role to the difference the company makes in the world, they’ll be more invested.

Another important part of fostering employee resilience is managing change effectively to ensure the entire company views change as a welcome challenge, rather than an unwelcome roadblock. Changes happen in every company. Those with a culture that supports change can more easily adopt resilience.

Who Leads Your Culture, Sustainability, Social Justice & Resilience Efforts?

Leaders in an organization have an outsize role to play in setting culture because we are responsible for socializing and integrating employees into the system.

Providing meaningful leadership on sustainability issues and creating resilient business strategies requires that companies consider culture, which is the product of norms, values, structures, and incentives.

Leaders communicate rules, norms, processes, and tasks. Employees will closely watch and absorb how we behave and the explicit and implicit signals they give, and they will modify their own activities and communications accordingly. This is the real meaning of “tone at the top.”

The ongoing dramatic shifts in the operating context require more diverse and ethical leadership teams that prioritize pro-social behaviour over relentless self-interest and are open to collaborating with diverse external stakeholders to drive innovation. The need for collaboration is increasing over time. As leaders start reaching into a wider set of communities with localized contexts we need to get away from the uniform approaches that multinationals have developed, and partnerships help close that gap.

Few corporations can afford the likes of a Chief Sustainability Officer (CSO). Traditionally, a corporation's ESG and CSR efforts are led by functional leaders in Human Resource, Government Affairs or Corporate Communications; and at times senior executives in the twilight of their tenure.

In this new era, a corporation's ESG strategy and overseeing its execution has to be led by its best and brightest business leaders who value diversity and collaboration above all else, and are closest to the stakeholders.

The need for more diversity at the top of organizations is not just about the scale of the societal challenges we face, it is also about the increasingly visible connections and dependencies across value chains and countries. The successful companies of the future will reward collaboration over competition as the best route to operational and financial success.