Stop, clean your hands and think afresh

Here's a link to my Thinkpiece published by the CII about duty of care in the insurance sector.
http://www.cii.co.uk/media/5490684/tp107_cork_clean_your_hands_25july2014.pdf

What's the purpose of business?

In today's business world there is a dominant view that  the purpose of business is to optimise shareholder return. But shareholdings were simply an innovative way of funding business expansion when family wealth and patronage were no longer sufficient to do this effectively, back in the pre-South Sea bubble days.The actual purpose of business was and still is to make or service something for customers and the success of this creates shareholder value as an important outcome/bi-product of the overall purpose.

The original social and community purpose of the banking industry has clearly been lost in recent years and so it's good to read today's report by the Thinktank Respublica called "Virtuous Banking."  It suggests, among other things, that the purpose of banking is to "ensure systematic prudential security, work for the prosperity of customers, promote the responsible creation of value". This focus on "responsible creation of value" is possibly an aspect that all businesses could aspire to. The report also calls for more shareholder activism in holding the Executive to account in achieving this purpose. If the suggested actions are adopted there is a chance that the banking industry could become a beacon of responsible business practice with public trust rebuilt. It's a long way off but quite an inspirational purpose.

Word-of-mouth grows revenue.

One of the business benefits of treating stakeholders fairly is it helps to engender genuine word-of-mouth (WOM) referrals and recommendations. The businesses which have WOM included as an important measurement in their organisation’s metrics are likely to be interested in recent research analysis by The Boston Consulting Group (BCG) which has concluded that, “The revenue growth of the brands with the highest advocacy levels is far above the industry average”.

The big question BCG asks however is how to drive brand advocacy and reach key influencers. "Innovative approaches, e.g. attempts to make the brand go viral and create a YouTube phenomenon have sometimes been successful but the commercial benefits have been less clear".

This suggests that these organisations are looking for the quick fix and short-term solution that can create a limited, but exciting, digital buzz. Perhaps one of the best ways to build sustainable, authentic and meaningful advocacy is through a solid strategic and cultural approach to fair treatment and transparency which over time will help to build trust.

Nike’s example to get boards to “just do it”

 In this month’s Harvard Business Review it mentions an initiative that Nike took back in 2001 of creating a dedicated board level corporate responsibility committee i.e. putting corporate responsibility and its impact on long-term success firmly on the board agenda.

It states that such a committee could be a valuable initiative for many companies in five ways as a: 

• source of knowledge and expertise; 
• sounding board and constructive critic; 
• driver of accountability; 
• stimulus for innovation; and
• as a resource for the board.

 With the competitive challenges today’s boards are facing in meeting diverse stakeholders' demands, these seem pretty compelling reasons for boards to address responsible business head on, and simply just get on and do it.

What do Burberry and the Energy sector have in common?

What do Burberry and the Energy sector have in common? More confident and complaining stakeholders. A few days ago 53% of Burberry investors voted against the Board's remuneration report which included big share pay-outs to the chief executive. Today the Energy Ombudsman reported that there was a doubling of customer complaints in the first 6 months of the year compared to the previous year. So it looks like a whole bunch of key stakeholders from a range of sectors are starting to feel a bit more empowered about what they regard as unfair treatment.

The critical issue now is how these organisations, and others like them, respond and from the report of Burberry's Chairman's response who stated that the vote against them was "disappointing" some still don't seem to get it. It will be even more "disappointing" when customers and investors start to walk. The positive factor in taking complaint handling and negative voting seriously is that it provides valuable feedback. With good "root-cause analysis" of complaints businesses can start to address the issues before it's too late. The old adage "a customer complaining is a loyal customer giving you a second chance" may no longer be true but listening to stakeholders,taking them seriously and treating them with respect, are good starting points in rebuilding trust and loyalty.

Sterling effort needed to make trust the ultimate currency

With leaders in all walks of life now being exposed for their greed, immoral and unethical behaviours the levels of trust in society and business are plummeting.What is needed now are sterling efforts by leaders to boost levels of trust in their organisations and they need to start right now as this is a long-term game.

Good starting points are to focus on the fair treatment of all stakeholders and to engender an open culture with transparent practices key. Shareholders may be pressurising for better returns but there is only one currency they really need to trade in for a sustainable future and that is trust. We need more pressure from them and independent non-executive directors to take the long term view to re- build confidence in business and society.

Employee ownership day

Today is Employee Ownership Day and it's good to see alternative business models being in the media spotlight. The very successful John Lewis Partnership is the most prominent business in the UK set up in this way. Bearing in mind the cliched business mantra " our employees are our main assets" it would be great to see more companies getting established like this, rewarding their employees for their hard work and value added. Having both an emotional and financial connection to an organisation is more likely to engender ethical behaviours which then help to build trust and long term value.

Facebook's manipulation of emotions restricts future freedom of choice

This week there have been reports that the regulator the ICO (Information Commissioner's Office) has started to investigate whether Facebook is in breach of the data protection law. This is because it ran a psychological study with a couple of US universities on users without their consent.

Basically the emotion test manipulated the extent to which people were exposed to expressions in news feeds. The findings are more than interesting. They found that by suppressing/delaying negative newsfeeds for example they could reduce the number of negative posts, and vice versa. Apart from the obvious concern about lack of transparency the big question is: what are they intending to do with the findings?

The Facebook business model is based on selling data which their customers freely give up in return for the free, relevant service they enjoy. The manipulation of emotions in real time is clearly a big commercial opportunity for Facebook if you think in terms of stimulating brand purchase,economic feel good factors/ political voting for example, but is having emotions manipulated really part of the deal? A question for the future therefore has to b,e is it really ethical to promote a free service without clearly stating that this may actually restrict your freedom to choose for yourself because someone, behind the scenes, is actually playing with your emotions and helping to dictate what you choose?

Good ethics is about emotional connection in the workplace.

A piece of advice from Jordan Thomas, the ex Assistant Director of the Securities and Exchange Commission in the US (a place where they have to engender the "right" culture to prevent fraud and bribery):
" instill a sense of community in your workplace. After all, ethics is a natural outgrowth of a healthy working environment where employees have a sense of belonging and are concerned about the well-being of their colleagues, customers and the organisation as a whole...if employees are not emotionally and intellectually connected to their work, they are far more likely to engage in unethical behaviour because they are not constrained by the potential impact of their misconduct on others".

This is why business ethics has to start with the fair treatment of employees and where such employment practices as zero hours contracts (of benefit to the employer but not the employee) actually damage an organisation's prospects of ever engendering the right behaviours.