The Coronavirus crisis has seen some incredible corporate responses. Google has pledged $800 million in ads and loans to help businesses and crisis response efforts. Unilever is donating €100 million of food and sanitizer, and guaranteeing the jobs of all of its 155,000 workers – including contractors as well as employees.
These stories are inspiring. But they also seem unrealistic for most companies. What if you’re in an industry that’s not directly impacted by the crisis, such as property insurance? What if you’re a small enterprise that doesn’t have millions lying around? Or if you’re a big business whose revenues have plummeted, such as an airline? You know that keeping all workers on full pay would be the “right thing to do” – but you’d go bankrupt and they’d permanently lose their jobs. While there’s indeed evidence that purposeful behavior does eventually lead to profit, that’s only in the long-term. In the crisis, it’s costly, and companies need to focus on survival. So, can leaders really afford to think about responsibility?
Indeed they can – by shifting their thinking on what “responsibility” actually means. Many business leaders believe that the value that a company creates is a fixed pie. That pie can go either to shareholders or to society. A responsible business, the thinking goes, is one that sacrifices profits (shareholders’ slice) to ensure that enough goes to society. This might involve making large donations to charities, paying higher wages to employees, and investing in reducing its carbon emissions. And that indeed might be difficult for in a crisis – or even in normal conditions if you’re a start-up.
Ensuring that society has a fair slice of the pie is indeed important. But that’s not the heart of what responsibility is about. As I explain in my new book, “Grow the Pie: How Great Companies Deliver Both Purpose and Profit”, responsibility is about growing the pie – creating social value. Doing so increases the slices of not only society, but also investors so profits rise as a by-product. Growing the pie means answering the question “How is the world a better place by my company being here?” “We give to charity” or “we don’t mistreat our workers” is an insufficient response. Responsibility isn’t about non-core activities (giving to charity) or doing no harm (not mistreating workers). It’s about actively doing good through having an uncompromising commitment to excellence and innovation in your core business.
Let’s take an example. Vodafone was the first telecoms company to release a tax transparency report on how much tax they were paying worldwide. They were rightly lauded for that, because paying fair tax is important. But that’s about splitting the pie. Instead, Vodafone made a far greater contribution by launching the mobile money service M-Pesa. Notice that mobile money isn’t mobile banking. Mobile banking is when I have a Bank of America account and operate it on my phone rather than in a branch. For mobile money, your citizens don’t even need to have a bank account. So it seemed a crazy idea at the time – banking without a bank. But it was crucial since many Kenyans didn’t have access to banks. It ended up lifting 200,000 Kenyan households out of poverty in the first seven years. Many of these households were headed by women, and M-Pesa allowed them to move from agriculture to retail. It thus had many positive secondary effects in gender equality.
The importance of pie-growing is highly pertinent in a time of crisis. There’s no doubt that responsibility involves executives and investors bearing their share of a shrinking pie, to reduce the burden on others. The tremendous actions mentioned at the start – CEOs working for free, firms paying their workers during shut-downs, and companies donating their products – are highly laudable and should never be underplayed.
What Can Your Business Do Today?
But the value of thinking about responsibility as pie-growing is that it unlocks the potential for all companies to play their part – including those in unrelated industries and without funds to donate. A responsible leader asks herself: “What’s in my hand?” In other words, “what resources does my company have that I can use to serve society?”
Such a mindset can inspire some great ideas – just like Vodafone contributing to financial inclusion even though its core business is telecoms. The New England Patriots might not obviously have anything relevant in a crisis. Football tickets and replica merchandise are of little value. But what’s in its hand is its plane, which flew to China to pick up 1.2 million N95 masks and fly them to Boston. Ford is making hospital gowns out of repurposed airbag material.
Sometimes, what’s in a company’s hand is its relationships with other firms. Qantas Airways can’t afford to keep paying its staff, since its business has been badly hit. But it has a relationship with Woolworths grocery store, whereby customers can earn Qantas miles for shopping in Woolworths. It’s leveraging this relationship to redeploy its staff to Woolworths – not only safeguarding their incomes, but also serving wider society given the spike in demand for groceries.
And thinking of responsibility as growing the pie is particularly relevant for small businesses, who don’t have the resources to donate slices of the pie. In financial markets, two assets of equal value trade – an investor pays $100 for $100 of shares. But society is not a financial market. The key to creating social value is to give gifts of unequal value, that are worth far more to the recipient than it costs you.
Take Barry’s Bootcamp, the boutique fitness studio. What’s in its hand is fitness expertise, which it’s using to offer free livestreamed workouts – particularly valuable when citizens are staying at home. It also has many staff trained in mental first aid, available to call on those who are finding self-isolation particularly tough. And they’re also reading stories to kids over Zoom, to take the load off working parents.
Critically, the idea of thinking about what’s in our hand – what gifts of unequal value we can give – applies in good times as well as bad. Responsibility certainly involves paying fair wages to employees. But it also entails mentoring them, viewing them as partners in the organization, and giving them opportunities to step up. Responsibility may not mean giving bells and whistles to customers, but stepping into their shoes, taking feedback seriously, and forming personal relationships. Indeed, the book provides rigorous evidence that creating value for society ultimately benefits investors – so the idea that the pie can be grown and both can benefit is realistic rather than wishful thinking. Responsibility is not just “worthy”, or something that should be pursued in crisis times. It’s good business sense, and is fundamental to the success of a company at all times.
If there is any silver lining to this crisis, it’s that it will permanently inspire business leaders to think innovatively about how they can use what’s in their hand to serve society.
Contributed to Branding Strategy Insider by: Alex Edmans, Professor of Finance at London Business School and author of Grow the Pie, How Great Companies Deliver Both Purpose and Profit.
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