Fernando Fischmann

Rethinking Corporate Purpose

2 July, 2015 / Articles

During the last year I have been fortunate to attend a number of conferences on talent management and corporate performance. Most recently I was on a panel at the Milken Institute Global Conference which examined this issue. The panel consisted of a mixture of academic and corporate executives. Everyone on it agreed that talent is a critical determinant of corporate performance. This is hardly a radical conclusion, it is one that is reached in every meeting that I have attended during the last few years.

The recognition that talent is one of the most important, if not the most important, determinants of corporate performance represents a step forward. In the past, all too often talent has been thought of and treated as a maintenance item, not a critical determinant of performance. It has been looked at as a “don’t mess it up” factor rather than a source of competitive advantage, and as a result, has not been a major focus in many corporations or one where organizations have done new and exciting things in order to gain a competitive advantage. This has changed; there is much more experimentation going on in the area of human capital management and more focus on it. A combination of factors have led to this including the use of big data, analytics, and the changing nature of work and society.

What has not changed in most people’s minds is the perception that good talent management is a means to an end, not end in and of itself. Most organizations and executives still don’t believe that organizations should have as an objective treating people right. In this respect, it falls into the same category as the impact of organizations on the societies in which they operate and on the environment. They are seen as worth focusing on if they add to the bottom-line performance of companies. Many organization will say, “in order to be good citizens, we will pursue sustainability, community impact or employee well-being as part of our responsibility,” but it is not considered to be a major objective of most corporations.

In my presentation at the Milken Institute Conference, I made the point that the long-term sustainability of corporations may well depend upon them having a positive impact on their employees, the society and environment and that they should be pursuing this goal with as much vigor and focus as they pursue their profit goal. This argument, that I like to call the quadruple bottom-line argument, means that organizations should look for ways to management that treat people right, treat the society right, treat the environment right and treat their financial well-being right. Only by doing this can organizations guarantee their long-term survival and the survival of capitalism.

Corporations should continue to serve the societies that create them, and that means performing well in terms of the quadruple bottom-line. The old argument that corporations only need to focus on their profitability is outdated and short sighted. Economists will say that making high profits is the best way they can serve society, the environment and their employees, but that simply doesn’t hold water. Organizations need to figure out ways to manage and operate that balance and optimize a combination of societal, environmental, financial and employee well-being performance. To do otherwise puts corporations at risk with respect to legislation and society’s tolerance for their existence. It also assures that the society we live in will be less desirable. Corporations are the best hope we have created for solving the major environmental, societal, and well-being issues that we have. Therefore, it is particularly important that they accept and commit to the quadruple bottom-line approach rather than to a profit-at-all-cost approach, which will bring further regulation and little importance.

More and more corporations are reporting that they have programs which make them more attractive to work for because they do a social good. This, in turn, reduces turnover and saves money. There are many things organizations can do that are win-win actions, doing them is a “no brainer.” In addition to them, corporations need to do things that assure that they perform well in all four quadruple bottom-line areas. Admittedly, at conferences like the Milken Institute Conference, this clearly is a minority viewpoint. However, we do now have a growing group of B Corporations that are committed to this approach. Clearly, we have a long way to go before most major corporations commit to a quadruple bottom-line approach and the B Corporation approach, but there are encouraging signs of progress. We are learning a lot about how to create corporations that perform well when they are designed to perform well on quadruple bottom-line measures, but more about that in a later blog.



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