Maximizing shareholder value wasn’t enough for me. That isn’t a purpose or reason for existing; rather, it should be a by-product. When my previous employer announced a fourth round of layoffs to map head-count to revenue, I knew my time had come. You can’t cut your way to breakthrough performance and growth.
Recently, Business Roundtable, an organization composed of the CEOs of some of America’s most successful corporations, put out a statement that redefines the purpose of a corporation. Since 1997, the organization has said that a corporation’s key function is to bring its shareholders maximum value. This time it listed that goal last. Above it were goals such as bringing value to the customer, investing in employees and serving their communities.
Bravo! Time will tell how committed leadership is to putting people before maximizing profitability.
It’s a statement based in the concept of conscious capitalism. Conscious capitalism recognizes that businesses have obligations beyond simply making money — and that people and communities will thrive more if businesses meet all of these responsibilities. My friend Joni Thomas Doolin, chairwoman and founder of restaurant industry data and insights powerhouse TDn2K, is a longtime advocate for this better way of doing business. Joni is a co-founder of Changers of Commerce, an organization espousing these principles. We spoke about what businesses should be thinking about in order to meet this broader mission and why being a bit more socially conscious will also help your business’ bottom line.
Create Trust in Your Employees
Our societal institutions have taken a beating in recent years, but Joni points to a different trend on the horizon. Data from the 2019 Edelman Trust Barometer indicates that while institutional trust is low, many people do still trust their employer.
Employees aren’t just looking for a paycheck; they’re looking for broader meaning, Joni says. “Whoever I work for needs to stand up for something, and they need to care about me,” she says, framing the issue from an employee’s point of view. “I need to be able to trust these people.”
It’s an interesting strategy, but one that’s borne out by other sources as well. Research shows that people are more engaged when they work for a company whose values they share. So conscious capitalism starts with clarifying your organization’s values, and then figuring out how to communicate those values — not just with your words but your actions.
Invest in Your Team — and Don’t Forget Management
Professional development can also help create employee trust. By showing an employee you value their continued growth, you build a trusting relationship while also investing in the future of your business.
However, Joni notes, development opportunities are fewer and farther between as employees rise up the org chart. She points to her area of expertise, the food service industry. As wages for lower-level employees have gone up, companies have budgeted less money for management, including development opportunities. “General managers are doing worse from a compensation standpoint than they did 10 years ago,” she says. “Their jobs are twice as hard, and companies quit investing in them.”
This, she says, is a mistake, and she’s noticed that companies are beginning to see the error of their ways. “The general manager of any business is correlated to every single business metric you can shake a stick at,” she says. Providing the development your managers need also helps your managers bring more personally to their position, Joni says. “It’s really recognizing the need for purpose and meaning.”
Ultimately, creating a conscious organization is the responsibility of leadership, Joni says. First, she says, leaders must be transparent with their employees. “The leaders who can be genuine and honest with their employees are going to do so much better in terms of market performance,” she says. It doesn’t necessarily mean you’ll be popular, she says, but sometimes it takes real honesty to win something worth much more than popularity: trust.
But as I think back to the Business Roundtable statement, I can’t help but think about the other stakeholders the statement lists: customers, vendors, community. With vast buying options these days, clear consistent communication goes a long way. And if we want to make sure we serve all of our stakeholders, let’s make sure we’re sticking to those principles.