The world is changing and unless companies change their ‘purpose’ to something other than executive remuneration and stockholder returns, they will lose their licence to operate from the stakeholders that actually matter, writes JESSICA YELLIN, founder of It’s a Shovel.
South Africa is well behind the curve, but the good news (or bad, depending on where you sit on the issue!) is that the money is moving into ESG (Environmental, Social, Governance) and the recent Steinhoff disaster has proved to the local market that pesky governance and compliance issues are important!
So, like it or not, it’s time to get with the programme. Here are my top ten things every SA CEO needs to know this year:
1. Leaders with a sense of purpose are more successful
For your company to embrace #ReputationWithPurpose and reap the benefits, you need Purpose! And it’s not just good for the company, it’s good for you too.
New research has shown that actually having a sense of purpose, not a specific set of characteristics, is the key to successful leadership. However, according to a report in HBR, less than 20% of leaders know what their individual purpose is and even less can actually spell it out.
“The process of articulating your purpose and finding the courage to live it—what we call purpose to impact—is the single most important developmental task you can undertake as a leader.”
Finding your purpose and / or properly interrogating that your stated purpose is ‘real’ is a process, but before you rush off to your closest quack coach consider this: if you’re clever enough to be ‘at’ or ‘close to’ the top of the pile, you’re probably clever enough to figure it out yourself! It just needs time, brutally honest introspection, curiosity and an open mind.
2. Hurry up and find your purpose because the CEO Activism trend isn’t going away
South African CEOs have since 1994 become conspicuously silent beyond a couple lame attempts via Business Leadership SA. And as they say, silence implies consent so no wonder that memes like #whitemonopolycapital get as much traction as they do!
Internationally, the Activist CEOs are not only shaping policy but also driving revenues for their businesses because, surprise surprise, consumers respect leaders and by extension their organisations, for being brave, taking a stand and making change happen!
In his piece, The New Politics of Business, Doug Randall, CEO of The Protagonist, sums it up best: “The days of businesses operating in a silo are over. Consumers have grown to expect that the brands they interact with participate in conversations happening in the world at large. Brands are powerful, and they can significantly influence the narratives they engage with. Getting involved in controversial narratives makes brands, and the communities around them, stronger. It’s just imperative you understand how those narratives may impact your organization, for better or for worse and be prepared to answer for them.”
It’s time to find your voice and weigh in on the many, many, many issues that confront our country… but of course this implies that you have to be doing something too!
3. All of the above is the Millennials’ fault, but best you learn to love them because they going to make or break you!
So much has been written about the Millennials that I’m not going to bore you with the demographics or even the psychographics. Their impact is now in the numbers! According to The Reputation Institute, Millennials now represent 27% of global spending power (and increasing daily!), 15% of them define themselves as Activists (#ahem) and 85% of them use their phone more than 40x per day (although I bet your usage is similar!).
Even more relevant here is that reputation is more important to them than previous generations! Top reputation ranking companies score 2.5bps higher amongst Millennials.
Translate this into bottom line: 1 bps = 2.6% increase in market cap… you do the maths on your own business… Ka Ching, Ka Ching!
4. Sustainability is now an economic issue and not just a bunch of greenies
How much research do you need to see to prove the point that sustainable companies deliver better financial results? Well, my friends at Arabesque Asset Management have done the hard work for you and commissioned the University of Oxford to review 200 pieces of academic literature on the topic. Their report From Stockholder to Stakeholder makes for fascinating reading, but I know you don’t have the time, so here are the highlights:
a. Sustainability is one of the most significant trends in financial markets for decades.
b. 90% of the studies on the cost of capital show that sound sustainability standards lower the cost of capital of companies.
c. 88% of the research shows that solid ESG practices result in better operational performance of firms.
d. 80% of the studies show that stock price performance of companies is positively influenced by good sustainability practices.
e. Based on the economic impact, it is in the best interest of investors and corporate managers to incorporate sustainability considerations into their decision-making processes.
f. Active ownership allows investors to influence corporate behaviour and benefit from improvements in sustainable business practices.
g. The future of sustainable investing is likely to be active ownership by multiple stakeholder groups including investors and consumers.
Still not convinced? Well then I suggest you cash out those stock options and go far, far away!
5. A poster in the toilet cubicles is not going to turn your business into a sustainability-driven, purpose-led success story.
Once upon a time, internal communications consisted of your PA putting together a weekly company newsletter full of clip art and comic sans. Most companies have moved past this, but still the internal comms function is generally the “Cinderella” of the Communications Team with the sexier corporate communications and marketing sisters getting the glory and budgets.
But there is now too much at stake. Make sure your internal communications professionals fully understand your business and objectives; can pick up and respond to the nuances within the business; and can deliver sound, strategic and creative internal communications that is able to shape the culture you need to get ahead.
I suggest you point them to this fantastic resource: Disrupting the Function of IC
6. Sadly, however, great internal comms isn’t good enough either! You need HR and IC to work together to deliver Employee Engagement 2.0
Employee Engagement… the Holy Grail! How much kak have you read on the topic? How many surveys have you done? How many ‘ interventions’ have you wasted money on?
Everything you’ve seen or heard to date is a load of bull.
There’s a simple formula*: Employees must feel “in flow” in their jobs + they must have a deliberate career path + they must feel attached to at least one other person in the organisation + they must feel like a mentor / ambassador + you need to have active, functional social networks through which relevant, honest, timely communication must flow.
Only when you have personally fulfilled, connected employees can they function together to deliver the ‘employee engagement’ that you dream of. Because you really do need it, especially if you are going to be steering a new course!
* I developed this with a former colleague who is way cleverer than me and you’re welcome to chat to her if you need some help in this space.
7. Has anybody actually read King Code IV?
No, it’s not a new Dan Brown novel.
Yes, it applies to you too!
Nothing like a good corporate scandal to wake everyone up! We should actually be thanking Mr Jooste. Well, maybe I’ll consider it if my Pension Fund recovers.
Point is, there were blatant lapses in governance at Steinhoff for years and no one raised an eyebrow because they were all too busy counting the cash! Well, the chickens have now come home to roost and going forward, best you are able to recite King IV in your sleep. I can’t tell you how many listed companies’ websites still reference King III… hello!!! And as for unlisted companies… whatever!!!
I’m sure you have read it, but just in case you need a refresher, here you go: http://c.ymcdn.com/sites/www.iodsa.co.za/resource/resmgr/king_iv/King_IV_Report/IoDSA_King_IV_Report_-_WebVe.pdf
8. A big, fat corporate burp is sometimes exactly what is required
To my horror when I shared my #ReputationWithPurpose deck with someone recently he said it looks like “corporate indigestion”. Eventually I got over myself, but he makes a valid point. It is a lot to swallow… but consider it an Eno’s: fizzes in your nose going down but makes everything better by releasing a big, fat burp!
In fact, it’s nowhere near as bad as Eno’s. You don’t need to implement the whole lot at once, it’s designed as a process. Baby steps will get you there.
But it will probably result in the expulsion of hot air. Maybe that means you need to change some people in your organisation? More than likely you will need to change the culture. And you will certainly need to get rid of waste. All of these are good things. Don’t be scared!
9. You need to learn to manage your shareholders
I’ve read the most interesting articles recently on Agency Theory and the implications it has for corporate governance. Once again the Harvard Business Review explains it way better than I ever could so please take out half an hour to read the whole article.
The basic premise is that the traditional agency theory model is flawed. Shareholders do not ‘own’ the company and therefore shouldn’t direct what the company does. It argues for a company centric approach in which the executive team and Board are responsible for creating value for all stakeholders. The only problem with this view is that is depends on competent and ethical executives and we have seen clearly that this is not always in place.
I believe we are moving into a time of increased shareholder activism which sounds like a good thing but isn’t always. Fund managers are not always right and they also have bonus targets to meet.
So I guess the only adult thing to do is to engage actively with your shareholders, within the bounds of the applicable regulations, and if they don’t get your #ReputationWithPurpose vision then do as Howard Schultz of Starbucks recently did and tell you shareholders to invest elsewhere .
10. If it’s not fun anymore, quit
Sustainability and #ReputationWithPurpose refers to you too… your life needs to be sustainable and it must have purpose (as per point 1). If what you are doing isn’t delivering this, then either change it or leave. I did, and I’ve not looked back!