Adapting to a New Set of Expectations
Written by Ben Boyd
To put it simply, the public’s expectations for businesses have changed.
Consistent financial returns and quality products and services were once the building blocks of a successful company. Now the most successful and trusted organizations are those focused on societal factors – not just business competence. Those most successful enterprises are those who listen to customer needs, treat employees well and place customers ahead of profits. And these types of ethical business practices are more important than ever.
The past five years spurred the greatest dissolution of trust in modern history. We experienced the collapse of Lehman Brothers and the 2008 Financial Crisis; government letdowns in Greece and Egypt; and the fall of idolized leaders such as Lance Armstrong and General Patraeus.
Business operates in complex times and must embrace this complexity by not solely acting in self-interest. Instead, they must execute on both operational and societal fundamentals. Enterprise must act ethically while ensuring stakeholders know they are doing it and why they are doing it.
Expectations of Business in Today’s World
All businesses must acknowledge that the world has changed in three fundamental ways. The first is that authority is now dispersed. Consumers around the world can access endless sources of information, which means that no one – not companies, not the media, not corporate spokespeople – can truly control how information is shared.
Secondly, the traditional pyramid of influence is flipped. Employees, consumers and activists now drive the agenda, rather than the CEOs, government officials and influencers of the past. The C-suite must continue to lead, but the model of successful leadership has and continues to evolve.
And thirdly, reputation is built on quality. Good financials are no longer enough. All stakeholders impact a company’s bottom line, not just the loudest shareholders.
In this environment – where complexity is abundant and transparency is a mandate – trust is paramount and ethical business practices are a must. For a company to connect with customers, regulators and employees, its strategic business results must align with its own ethical standards and those of the marketplace.
The Creation of Ethical Foundations
Ethical business practices are just good business. Companies use them to drive profits and force other companies to follow their lead or fall behind. They boost brand and enhance goodwill. And they are important to a company’s audiences. Our 2013 Edelman Trust Barometer proved – again – that global respondents believe that “engagement” and “integrity” were more important than “operations” and “products and services” when evaluating how much one trusts business.
The only way for companies to triumph in this environment is to shift their ways of thinking – to move from earning the license to operate to earning the license to lead.
At its core, earning the license to lead is the implementation and communication of strong ethical business practices. It requires companies focus less on rules and more on principles, and shift their cultures from ones of compliance to those of value-based leadership. For us at Edelman, this means we must be committed to operating through a lens of “doing the right thing”. Our values of quality and entrepreneurial spirit challenge us daily to deliver innovative solutions and breakthrough strategies for our clients. Our values of integrity and respect are a foundation for expanding our business responsibly.
Furthermore, that license to lead means companies must acknowledge what their constituents are most passionate about – and then build on those areas of shared interest. For Chipotle, that is ethical farming. “Food With Integrity” is its commitment to finding the very best ingredients raised with respect for the animals, the environment and the farmers. For Unilever, it is sustainable living. The company launched its “Sustainable Living Plan” in November 2012, promising to achieve three significant outcomes by 2020: to help more than one billion people take action to improve their health and well-being; to halve the environmental footprint of the making and use of its products; and to source 100% of its agricultural raw materials sustainably. Each of these companies took fundamental aspects of their strategy, built ethical practices around them and used them to drive business results.
Earning the license to lead also requires that companies embrace radical transparency. This means engaging in authentic two-way dialogue with the public – relinquishing control and providing stakeholders with an unprecedented level of information that includes the good and the bad. A fantastic example of this is the transparency of Howard Schultz’s return to Starbucks as CEO and the resulting transformation agenda. When Shultz came back to the company in 2008, the company had lost touch with its emphasis on customer-facing initiatives while instead focusing on growth. He publicly admitted that service had fallen below standards and did something about it – closing the coffee chain’s locations to retrain baristas and regain Starbucks’ “soul of the past.”
Translating Ethics to Value
In our increasingly complex world, trust and transparency are critical elements of corporate reputation. In the past, business success was about performance, customer service, price and quality. Now there is a new dimension: social responsibility built on ethical practices. Business success is increasingly based upon shared value and the sort of citizenry a company lives. Successful companies today will implement socially-responsible, transparent, values-led engagement with each of their audiences – employees, regulators, customers, investors and all others. Those that prioritize these ethical practices and true public engagement will not only succeed, but win.
Ben Boyd is Global Chairman, Corporate Practice, Edelman