We are headed into a winter of extreme uncertainty, both from a public health and an economic perspective, which will challenge leaders, operating models, and business planning for months to come.
When publishing our views on the impact of COVID-19 earlier this year, we introduced a framework for stakeholder management in this disrupted world that has proven to be very effective as a strategic lens on the situation. Faced with an uncertain and fluid environment, it is imperative for executives to take stock of where they are. Then they can understand the expectations of critical stakeholders during each phase of the crisis and their goals for the return to a new, stabilized normal.
Over a series of articles, we are going to look at each of these stakeholder groups, in turn, and suggest a structure for guiding decision making. Of all the various stakeholder groups, the first column—society —is a particularly tricky one for executives and boards. What are a company’s responsibilities to society as a whole? What is our broader purpose? How do our personal values factor into setting priorities?
This year has brought these issues into acute focus, as the uneven impact of COVID-19 has been experienced across geographic, economic, and racial lines, and amplified demands for social justice and an end to systemic inequalities have made the need for corporate introspection even more urgent.
In January, Larry Fink, CEO of Blackrock, the world’s largest asset manager, raised the bar on sustainable and inclusive capitalism when he established that a necessary investment criteria for his company going forward will be how companies perform on a series of Environmental, Social, and Governance (ESG) metrics, from labor practices to data privacy to business ethics to climate risk. In his view, those companies that will provide outsize returns to their shareholders over the long-term will be those that serve the interests of their broader stakeholder groups.
Effectively, Blackrock has said that there is a false dichotomy between shareholder returns and stakeholder management. While we agree in principle, priorities must inevitably be set when allocating limited resources, and setting these priorities is only possible when grounded in corporate purpose.
What value does your company’s products or services provide to the world? Beyond profit, what is your reason for being in business? The answer will obviously be different for every company. But using purpose as your lodestar, you can begin to orient your company to what is important for your employees, your customers, the communities in which you operate, and ultimately your shareholders.
Setting these priorities, and staying true to them, in the midst of a global pandemic, is obviously a significant challenge. At many companies, budgets are being cut just as the needs within our communities are growing ever higher. During this period, keeping a focus on the long-term is essential.
For AlixPartners, our purpose is to assist our clients in successfully responding to their most complex and critical challenges, when it really matters. Being able to quickly deploy the right people with the right skillsets is essential to delivering on this promise. If we are not a best place to work that recruits and retains the best people, then we cannot succeed in this mission.
This is why building a diverse workforce with an inclusive and welcoming culture is an essential priority for our firm. Our industry has not always successfully lived up to this standard, but both our clients and our employees demand it of us. And we know that diverse teams provide superior client results.
If diversity and inclusion is our primary focus in ESG matters, companies in other industries have other priorities based on their own corporate purpose. BP is truly repositioning “beyond petroleum” to become an integrated energy company that will cut oil production by 40% over the next decade and reach net-zero emissions by 2050.
Nike, in choosing to affiliate itself with Colin Kaepernick in 2018, clearly recognized that its purpose doesn’t lie simply in its role as athletic apparel manufacturer. Nike is a lifestyle brand, which necessitated it taking a position on those social justice issues for which Kaepernick had become a leading voice. This decision may have cost Nike some customers at the time (its stock fell 3% when the deal was announced), but ultimately the company has been proven right both commercially and ethically. Following Black Lives Matter protests this year, NFL Commissioner Roger Goodell said that he wishes he’d “listened earlier” to Kaepernick.
These are companies that are choosing to disrupt themselves to promote broader societal goals, whether on matters of climate change or social equity. Demonstrating such leadership is essential in a world in which consumers, investors, regulators, and the world at large demands more from businesses. And what does business get in return?
With the right focus and determination, Ana Botin, executive chair of Banco Santander, has described the end goal as building trust with the broader communities in which you operate: “Trust is not a nice to have for a profitable business. Trust determines whether you have a profitable business to run.”
As for AlixPartners, as we reflected on Blackrock’s ESG questionnaire this year, we feel stronger as a result of the progress we’ve made over the past few years and recognize that there is still further to go in our journey. Keeping our eyes on our broader purpose, continuing to disrupt ourselves, and collaborating with likeminded stakeholders, we will ensure that we stay on course.
Download the Stakeholder Management Framework and this article
AlixPartners Disruption Insights identifies strategic priorities and tactics that successful businesses are employing to survive—and thrive—in the midst of ongoing disruption cycles. Sign up to receive occasional email alerts when new Disruption Insights are published.