an integral part of good business performance, argues Duncan Brown
Well, what an excellent and productive summer this is turning out to be. What?! I hear you all exclaiming. With retail sales figures showing the toughest conditions on the high street for 20 years, layoffs at Asda and chief executives queuing up to lament their worsening financials and demand an interest rate cut, I can understand your surprise.
Yet for me, the feeder in my garden has been packed with bird fledglings for weeks, my kids won the borough swimming championship, and a sunny day saw the local church fete raise record amounts for charity.
We all know that our happiness and wellbeing depend on a whole variety of factors outside the workplace and its productivity. Sociologists have shown that once a country reaches a comfortable standard of living, greater output and income has almost no effect on the happiness of its citizens. In ‘post scarcity’ societies, economists are also coming to question whether the output-based measures of national performance that we favour, such as gross domestic product, make much sense. Do we really need more than the 15 varieties of dental floss I was forced to choose between in Boots?
In an advanced, service-based economy, measuring performance is much more complex than just counting the number of cars coming off the now defunct production line at Rover. For a physiotherapist or an advertising executive, the number of consultations or advertisements produced per week gives no real indication of performance, which research shows is much more dependent on the quality of interaction with their clients.
Business leaders too are recognising that a sole focus on output and short-term profits can be misleading, even dangerous, in the longer term. Researchers Jim Collins and Gerry Porras demonstrated that the most successful American corporations during the 20th century had two distinguishing characteristics. They had a broad sense of mission and purpose, beyond just making money, and they deliberately created an internal culture that motivated staff to pursue it.
CIPD research carried out by Bath University among companies including Tesco and Selfridges similarly found that the most successful have an engaging big idea that attracts staff and customers. They regard profits as the outcome rather than the sole focus of their efforts, with many employing a broad scorecard of performance measurement encompassing customer, employee and community, as well as financial, metrics. Long-established companies such as M&S and the John Lewis Partnership have always emphasised the need to manage their people well and engage in community activities, as well as delivering profits for shareholders. But a new CIPD report, Making CSR Happen, illustrates just how closely intertwined HR management and corporate social responsibility have become with the business performance agenda in contemporary society.
Consultancy Accenture now runs a very successful charity, Accenture Development Partnerships, supplying its expertise in developing countries at a fraction of the usual fees. The unit is staffed by seconded internal volunteers, who take a matching cut in remuneration. The venture obviously attracts good PR. In addition, Accenture have found that staff who have worked with the
venture are less likely to leave the firm and, helped by the new skills they develop, are more likely to be among their highest-performing consultants.
Another example in the report is BT. Facing intense competitive pressures, the company has reduced the number of call centres in the UK from 100 to 30, and set up two new facilities in India. The way in which it managed this potentially controversial restructuring won praise from independent consultancy Sustainability and its own trade unions. There was extensive consultation, a ‘golden guarantee’ of no compulsory redundancies, and extensive retraining of affected employees. Surveys revealed that the move had no negative impact on staff satisfaction levels.
Even the financial analysts are now taking notice of the FTSE4Good and Business in the Community indices of corporate performance.
In 1919, two Ford investors sued the company for suspending its dividend payment. Henry Ford argued that the money was better spent lowering car prices and that the purpose of the company was “to do as much good as we can, everywhere, for everybody”. He lost the case.
Today, more than ever, it seems that ‘good’ companies really are just that, and our measures of performance and success need to recognise this.