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10 December 2011

Doing Well by Doing Good

Tag(s): Business, Philanthropy

At the recent CBI Conference which I attended as a guest of the CBI the main theme was Accelerating Growth (see my blog 26th November, 2011). However, the issue of businesses doing good was also addressed under the subtitle of “Good for business, good for Britain, good for growth.”  Sir Roger Carr, President of the CBI, emphasized that big business is not bad business. We needed to stop the demonization of business, particularly the energy companies, the defence industry and the banks. It would be business that would be the engine of growth and we should applaud what is good. He had spent much of his career at Cadbury’s who summed it up in its watchword: “performance driven, values led.”

John Cridland, Director General of the CBI told us that in an Ipsos Mori poll only 29% of people generally trust businessmen to tell the truth. The scandal of the credit crunch and the generally accepted view that this was caused by greedy bankers has tended to stigmatise all of business. Some businesses have become disconnected from reality and it has gone beyond the stage of “What has business ever done for you?” Jack Welch, the great CEO of General Electric, said that “Shareholder value is a result not a strategy” but few seem to have listened to him. The disconnect is particularly apparent over senior executive pay and when politicians are saying “We’re all in this together” it’s patently not the case when FTSE 100 CEOs now earn 89 times the median of their employees. John Cridland gave his rallying cry of “Doing good by doing good business.”

Emma Harrison CBE, Founder and Chairman of A4e, has spent 24 years in business, helping individuals in disadvantaged situations find work and rediscover their ambition and motivation. She puts it slightly differently saying you can be “doing well by doing good.” When the steel industry was being hollowed out in Sheffield 25 years ago she saw many skilled workers being made redundant and then sent on retraining courses sitting in classrooms with little useful purpose when they just wanted another job. She set out with one vision- to improve people’s lives- and her company, which will celebrate its 25th anniversary next year, has helped over a million people get back into work. It now employs 4,000 staff in 11 countries and turns over £250 million and has developed from being a Sheffield based training company to a global leader in social and welfare reform. In helping people to find work it proves that it is possible to do well by doing good.

Emma asked the audience how many of them had a Corporate Social Responsibility (CSR) department. Most put up their hands. She said they could all save money by closing it tomorrow. “The good stuff sits in you” she said and unless you mean it it’s fake and people see through it.

John Lewis is one company that generally escapes the opprobrium of the public, at least partly because people know it is owned by its employees as partners who all receive a share of the profits. Charlie Mayfield, its current Chairman, told the conference that he perceived a disconnect between the personal experience of the employee and the general public perception of business. In other words most people are reasonably content in their work and rate their employers, both managers and institutions, as fair and well behaved. However, the public then draw a different conclusion when they extend the bad behaviour of a few to the many. The same thing does not happen in some other professions, so, for example, Harold Shipman is one of the worst serial murderers in history but noone draws a general conclusion that applies to all doctors who are usually seen as one of the most respected professions. Mayfield said that the key responsibility of a business is to offer employment and his company’s number one mission is “the happiness of its members through worthwhile and satisfying employment in a successful business”. He then commented on the issue of apprenticeship and said that the average apprenticeship in Germany is twice as long as in the UK and pays 50% more. In other words German businesses are much more committed to the concept.

Ali Parsa, Managing partner of Circle Health, has been in the news lately because the company will be the first private provider to take over a full scale NHS Trust in Hinchingbrooke. Circle is a partnership in the John Lewis mode and although Ali spent time on the dark side as an Executive Director of Goldman Sachs’ European Technology Investment Banking team he has now seen the light as a social entrepreneur. He quoted some of the greats in business creation such as Thomas Watson, founder of IBM, who said that “the difference between a great company and a good one is what we believe in” and Masaru Ibuka, co-founder of my alma mater, Sony, who from the beginning developed one basic concept to guide the company: “to contribute to human society by developing new products of excellent quality and performance, which are then offered through newly pioneered markets.” For Ali Parsa the Why is more important than the What or the How. He told the story of Sam Walton, founder of Wal-Mart, who was criticised by a Wall St analyst for selling a chair at $14.50 when his competitors sold an identical chair for $20. Why, asked the analyst, did he not make a lot more profit by selling it for $18 and still be competitive? But for Walton he cared more about his relationship with his customers and giving them the best possible price. A more recent example is Steve Jobs who by all accounts was a tough boss but has been mourned by millions because he solved the problems of his customers. (See my blog In Memoriam Steve Jobs 8th October, 2011).

We face difficult choices because if business does not respond to this crisis then the crisis will envelope us all. But it cannot respond by just doing what it is good at. It must also engage with the public at large and demonstrate the value it creates for the public good as well as its shareholders. When business strays from this path and one of its worst exponents is caught with its hand in the cookie jar politicians, themselves rarely paragons of virtue, respond to public or at least media anger with badly conceived legislation and regulation. Not only does this rarely work, but it may be counterproductive. After all the banks were apparently regulated but that did not stop them lending money to people who were not well placed to pay it back. Risk management is not about box ticking and strait jacketed compliance. It is about mature and considered assessment of not only what might go wrong, but how a business will respond if it did and then stress testing the management to see if they actually know how to respond. Just ticking the boxes may lead a board into complacency that their business is in good shape when in fact its mission is being perverted by distortions in pay or contradictions in strategy all leading to systemic risk.

It is certainly not a contradiction per se to do well by doing good.

Copyright David C Pearson 2011 All rights reserved


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