“Organisations have purpose and value beyond shareholders”

“Start with the purpose and strategy and the risks you’re concerned about”

“HBR June 2017 report says ‘a board’s primary responsibility is to the health of the company not the wealth of shareholders’ but many US shareholders disagree”

• Culture change is set from the top, but also set by the graduate intake. The hardest thing to change is the middle-management tier – they have learned to operate in the current culture, willingness to change or redirect is the lowest, and great boardroom intent can die in the middle quagmire unless hard work is done to bring them on the journey
• These new graduates, are likely the driver of desire to behave more ethically and sustainably, particularly for the big FTSE businesses. Boards are conscious that is what the next generation (Millennials) are looking for, and to attract and retain the best talent they need to have actions not just promises in place
• For some of the panel, even discussing ethical/sustainable behaviour was a non-starter, resulting in total disengagement when I asked the question (though this was a predominantly financial services panel so there may have been a risk concern)
• Ethical and sustainable behaviour in whatever terms, remains a bone of contention because at it’s heart it’s about the health of the company NOT the wealth of shareholders
• In developing purpose and values, and trying to shift culture, one of the key considerations we don’t do enough of is ‘watching for unintended consequences of promoting values you think are important’. An example was given of a value of ‘we deliver on promises’ which led to some very undersirable behaviours of success at all costs….

• The battle between boards wanting to be long term and the short term pressure of shareholders, is not going away anytime soon
• The value gap between market capitalisation and the balance sheet is again under examination, with EY having another go at trying to define the intangibles in a way that’s measurable (which I’d expect to include reputation, brand power, culture, momentum and goodwill at the least)
• The importance of diversity is not for ticking boxes, but for different viewpoints that avoid group think and reflect the broad footprint of the company supply chain (over 75% of sales of the FTSE100 are outside the UK), to make the best use of internal and local talent, and to provide role models to improve the top talent pool. It’s got to be about the individual, looking beyond the surface to see what they contribute that is different and valuable.
• The Chairman role continues to evolve – the challenge of diverse boards is harder to manage than a natural consensus. The Chairman has to set the tone, of inclusivity and mutual respect, otherwise chaos can ensue.
• Interestingly, the panel also wanted to point out that women are not risk-averse board members (as some would claim), just more thoughtful and willing to ask questions (“they don’t have the male conceit of having to seem they know it all already”).

1. ‘Purpose’ is about the organisation’s role, and may or may not be a social purpose about doing good – board language around purpose cannot assume that it is about doing good or being ethical as this puts the societal benefit ahead of shareholders. Reference Jim Stengel’s Grow in which only 1 in 5 of the ‘ideal fields’ was about impacting society, yet to hear some people talk about purpose nowadays you’d think that was the ONLY meaning.
2. Changing purpose WILL result in changing culture, therefore that impact needs to be debated and planned just like any other impacts on positioning, innovation pipelines, customer experience, etc
3. When thinking through implementation into culture and reward, we need to war-room possible negatives of the values we are promoting, not just desirable behaviours. You can’t be too rigorous in thinking through the impact of changing an orginations’s culture.

Further reading:

‘Grow:How ideals power growth and profit at the world’s 50 Greatest Companies’ by Jim Stengel