Value for Money

by Glen

B-W-Corporate-Sponsorship-GuysBusiness guru, Peter Drucker, continues to drive home the same message: “The purpose of business is to create and keep a customer.”  But how can that happen when citizens themselves continue to downgrade their expectations when it comes to business performance almost across the board?

How can larger corporations and businesses that have fallen so low in public estimation hope to regain citizen trust and community esteem again?  If they are truly serious about the matter, they merely have to look no farther than some of their peers across various industries.

But first they’ll have to stretch out their financial projections and performances if their efforts are to have any success.  Communities live year to year and have growth cycles that sometimes involve decades of investment.  Any company that remains merely interested in the next quarter reviews need not apply for community respect.  This is about the long game.

If companies are truly interested in their reputations and repairing the damage caused by decades of short-term thinking, then they are going to have to take the lead in bringing business and society back together – it’s not enough to just be dragged into community and economic renewal.  We’re not talking about the outdated strategy of “Corporate Social Responsibility” here, but an entirely new construct that puts community responsibility at the very core of the business model and not merely on the periphery.

Business reacts best when one of its own sets the example, and fortunately there are numerous business leaders and their companies developing a new model that, for wants of a better term, has been labeled, “shared value” (something we’ll explore in the next post).  Put in simple terms, it involves creating economic value by addressing the larger issues facing our respective communities.  It forms a new way of linking company success with social progress.  It’s not about charity; nor is it merely retooling businesses with the environment in mind (sustainability), but about creating economic success for all citizens.

Modern capitalism has clearly fumbled the ball when it comes to creating broader value, including the creation and maintaining of jobs, and the creation of community wealth and resources.  Such goals were always within its reach, but capitalism was too busy building quarterly success to notice the long-term damage it was creating.  As a result, trust and confidence even among customers is increasingly broken and an era of low expectations is upon us.

It’s becoming apparent that business and larger society are increasingly being pitted against one another, both in perception and reality.  Somehow we have bought into the idea that if companies were to invest in the broader goals of society that they then would have smaller profit margins.  And so many businesses remain hesitant to hire a larger share of physically or mentally challenged people, to invest in public infrastructure that they in fact would benefit from (roads, sewers, amenities), or to invest in the neighbourhoods in which they are situated because it is perceived that they wouldn’t make as much money.  We have arrived at a situation where businesses are excluded from broader societal responsibilities because it is perceived that their job is to create wealth and that’s it.  Business leaders themselves, trained over the last two decades, have come to believe that economic needs are all that define modern markets.  We are now realizing that financial markets must consider the broader social good if they are to establish and maintain a solid customer base and a loyalty that ensues over the years.

And so we have separated modern society into two groups – the growth and development of the economy (business and corporations) and the care of society’s social needs (governments, charities, and non-profits.)  This is an artificial division that also creates artificial solutions.

Shared value, as many business leaders now view it, isn’t about CEOs being engaged with community, or corporations donating to charity; it’s about expanding the total pool of economic and social value.  In other words, it’s places businesses closer to the centre of social good, with their main task being to expand economies in ways that are more inclusive than the present 99/1% model.  It’s all about companies looking at decisions and opportunities through the lens of shared community value and not just immediate gains.  An increasing number of corporate and societal leaders believe that such an approach will actually generate greater innovation and growth for business, and also greater benefits and resources for society. 

It is vital to note that much of this was common practice in previous eras, before deregulation, anti-labour jargon and practice, and an ever-descending cycle of corporate taxes had their devastating effect.  Yes, such changes meant that even more wealth could be generated, but the wealth was no longer distributed through broader society but to wealthy shareholders and corporate executives.  It has been an almost impossible task to organize citizens effectively enough to demand economic changes or to coax the corporate community to willingly come back to the table to create social good.

But a quick look at our communities now reveals that the great severance between business and social good is resulting in declining communities and the diminishing of hopes.  Time to change that, and some business leaders are urging that this be done sooner rather than later.

It was Einstein who once said, “Try not to become a person of success.  Rather become a person of value.”  The truly effective capitalism of the future can prove that the two aren’t mutually exclusive.