Archive for May, 2014
PriceWaterhouseCooper recently released their 17th CEO survey. In a by-lined article in PWC’s Strategy + Business, the company’s chairman, Dennis Nally, predicts that trust will become increasingly critical to business success.
The world in which we live and work is being redefined by five global trends: technological advances, demographic changes, global economic shifts, urbanization, and resource scarcity and climate change. These trends have far-reaching and often interrelated effects on society. For example, the migration of spending power to emerging markets, along with explosive population growth in some countries, will result in a billion people being better off than they are now. The same developments, however, could exacerbate unemployment, social unrest, and resource shortages.
The impact of these trends is radically changing society’s expectations of business. And the extent to which a business behaves in line with these expectations determines how trustworthy it is perceived to be. Trust is pivotal because it is the basis of every human relationship, every transaction, and every market. Trustworthiness is the foundation of a business’s “license to operate” in any region or industry.
All of this is causing chief executives to think strategically about international business ethics—specifically, how trustworthy their companies need to be. To generate that trust, CEOs are not just interested in growth for their enterprises. They want to attain “good growth”: real, inclusive, responsible, and lasting growth. And they want their companies to contribute to good growth in every country where they operate.
Public trust in business probably isn’t at its lowest point ever, but that’s not saying much. When some of the best and brightest minds in the world are devoting themselves to gaming the system (think Michael Lewis’ book Flash Boys), people are quick to believe that business is focused only on maximizing profits and share price growth for top executives. As a result, companies perceived to be good citizens can attract customers and investors looking to do business with people who want to make things better. “More chief executives believe trust levels have improved during the last five years, at least within their own industry, than believe they have deteriorated. These perceptions are borne out by public opinion. Findings from the 2014 Edelman Trust Barometer, a survey of the general public in 27 countries conducted by the public relations firm, also show a steady rise in trust. Fifty-eight percent of respondents expressed their trust in business, compared with 50 percent in 2009.”
In this new, connected world, there’s so much more transparency than there was in the Gilded Age of the 1890s. It’s no longer likely that a company can operate in shadowy ways without attracting attention. Today’s most successful companies–and tomorrow’s survivors–will be those who take into consideration the expectations of society as well as stockholders.
A socially relevant purpose that is defined, communicated, and embedded throughout the organization will provide employees with the context they need. And symbiotic collaboration with government can drive good growth at a national level.
CEOs who follow this agenda will create trustworthy organizations that enjoy far-reaching benefits. Their business will grow in a way that is fully engaged with society, now and into the future. Increased organizational resilience and improved performance will flow from engaged employees, loyal customers, and better relationships with business partners and regulators. Overcoming stakeholder skepticism will not only improve investor sentiment, but also create opportunities to lead the trust debate in the business’s industry and beyond.
A coming post will dive into more thoughts on purpose (click here for some excerpts from my upcoming book). But it’s great to see more leaders understanding that success can be shared and is sweeter when it is.
Andrew Sullivan points to Charles Kenny’s article in Bloomberg Businessweek on the interesting, even surprising rise of happiness around the world, as reported in the World Values Survey. The survey, which has data going back to 1981 and which covers 60 percent of the world’s population, shows that most of the population of the world claims that they’re happier than they were 10 years ago. Overall, the number of people to say they are “rather happy or very happy has climbed from 71 percent to 84 percent.”
There are unsurprising exceptions: The percentage of Egyptians who reported themselves happy nosedived from 2001 to 2012 – from 89 percent to 26 percent – as the country descended into political chaos. But only six of the 28 countries experienced declines, and many emerging economies reported considerably increasing happiness. The proportion of Russians willing to acknowledge being rather happy or very happy climbed from 47 percent to 74 percent over the decade. Respondents in China, Iraq, Kyrgyzstan, Mexico, Peru, and Zimbabwe all reported double-digit increases as well.
Even Americans claim to be pretty happy, although not as happy as they were in the past.
The proportion reporting that they are either very happy or rather happy was 91 percent in 1981, climbed to 93 percent in 1999, and fell back to 89 percent in 2011. In some ways, this suggests remarkable resilience in the face of stagnant incomes and an unemployment rate that almost doubled between the second and third surveys. Unemployment and the related uncertainty has a strong relationship with lower reported well being across the rich world.
There seem to be a good number of reasons why people are happier, particularly in the developing world. In spite of what we see on the news, violence appears to be on the decline and democracy on the rise. The low and middle economies have seen average incomes climb 130 percent since 1981 and infant mortality in children under five has been cut in half.
Read Andrew Sullivan’s post here.
Fascinating long article yesterday by Jimmy Guterman about tech CEO Stephen Wolfram. If you’re not familiar, Wolfram is the creator of Mathematica, the leading computational software for math and science fields, along with the Wolfram|Alpha computational knowledge engine. He’s also the author the 1192 page A New Kind of Science, in which he modestly proposed to do for our knowledge of everything what Isaac Newton did for mathematics.
In other words, change everything.
Wolfram is a genius, along the lines of Steve Jobs. (When he asked his friend Jobs for a blurb for his book, Jobs laughed at him, saying “Newton didn’t have back cover quotes. Why do you want them?”) In his book, he lays out the theory that rather than using mathematics to understand the most basic principles of physics, we should think of the world–of our entire reality from physics to human evolution and psychology–as being built on simple computer programs. But he’s not just a science geek, he’s also an iconoclastic and very successful business leader.
“Indeed, the practices Wolfram the man uses to lead Wolfram the company are anything but conventional. He’s best known for his technical discoveries, but his most ingenious invention may turn out to be a successful company that he built around his own idiosyncrasies: his decisions about where to work, when to work, how to work—in a nutshell, his insistence on building a corporate culture that behaves a lot like he does.
Conventional wisdom about leadership says that you shouldn’t act like you’re the smartest guy in the room. But how can you do this successfully if you are consistently the smartest guy in the room?”
While he gives the company an A+ on science and innovation, he gives them only a B or C on business. He knows they could have made more money had they focused on maximizing profits or gone public. It’s just that making money, while important to him, isn’t as important as changing the world.
What Wolfram has done, though, is build a company focused on identifying big problems and going at them without restraint. “It’s been a very positive thing here, being able to motivate people to work on what seemed like impossible projects. In many situations, you get in some meeting and somebody will say, ‘There’s 30 years’ worth of literature about this and it’s still an unsolved problem.’ At that point, the group might say, ‘Forget it, that’s just hopeless.’ At least we’ve managed to develop a culture where people say, ‘Great, let’s try and solve this.’ The thing that’s really interesting is how often one can.”
Read the article in Strategy+Business here.