Reset: Business and Society in the New Social Landscape
JAMES RUBIN AND BARIE CARMICHAEL
FORWARD
The result is a dichotomy of declining trust in and rising expectations of business.
Arthur W. Page, considered to be the first senior corporate public relations executive, observed in a 1939 speech on industrial statesmanship, “All business begins with public permission and exists by public approval.”
Throughout the century, a debate about the responsibility of business to society raged, with some (notably Milton Friedman) arguing that business’s only responsibility is to deliver a profit to its shareholders and others maintaining that business has a responsibility to create value for a broader set of stakeholders — including society at large.
The corporate social responsibility, which initially saw businesses seeking to conduct their affairs in socially responsible ways, is evolving into an era of conscious capitalism or share value, in which businesses are expected to create not just customer and shareholder value, but societal value, as well.
Today, they can tell, contend success depends upon hitting a three-way intersection: “ delivering a product or service that meets a customer’s needs through profitable business strategies that also benefit society.”
Today, however, a company wishing to manage its identity must attend to its corporate character, which includes purpose, values, and culture, along with business model, strategy, and brand. All of these must be defined and aligned to create an authentic, compelling, and unique identity. A company’s character, Reuben and Carmichael argue, is demonstrated by how it does business, with its employees and external stakeholders acting as its perpetual public auditors.
Inherent negatives
INTRODUCTION
Declining trust and Rising expectations
77% agree that Global corporations have a bigger impact on people’s lives today than they did ten years ago, 60% agreed that companies now see some functions in society that were previously reserved only for government, and 68% agree that it is as important to know how a company operates as it is to know what it sells.
SHIFTING SPOTLIGHT
Stakeholders have evolved from consumers of information to creators and movers of information.
rather than philanthropy, business has a direct state in a stable Society with institutions that predictably work. Business cannot succeed in a field Society.
1 – THE BUSINESS TRUST-EXPECTATIONS GAP
Whereas declining trust is old news, particularly for government and business, more significant is the concurrent increase in the Public’s expectations of Corporations on a global scale. This widening gap between falling trust and increasing expectations for big business coincides with both the rise of corporate social responsibility and the astonishing rapidity of new and social media as becoming both productive and destructive factors.
RISING EXPECTATIONS FOR A BOTTOM FEEDER
Small good big bad
Personal experience gained through direct engagement as a customer or an employee.
This degree of activism was substantial across all Global markets, and, perhaps surprisingly, activism was markedly higher in Brazil, China, and India than in Canada, the United States, and Western Europe.
NEW ERA OF BOTH/AND BUSINESS STRATEGIES
“Trust-expectations gaps”
DID YOU REALLY THINK YOU COULD BEAT GENERAL MOTORS?
As Douglas Holt remarks in How Brands Become Icons, to become iconic a brand must interact with the larger culture in a way that is relevant to significant tensions or change in society.
PRIMETIME WORTHY
For young managers or even journalists who rely on social media for news, mid-twentieth century media may now be an historical anecdote; yet an understanding of the dramatic changes in media is crucial to understanding the implications of the gap between the low trust in and high expectations of business.
FRAGMENTING THE CORPORATE NARRATIVE
For business — From consumer products companies to business-to-business Enterprises — the consequence of passively ignoring the realities of this new landscape are substantial, particularly when, in addition to starting out at a trust deficit, public expectations for business’s role in society are increasing. on a global basis, the public is actively seeking information not only on products and brands but also monitoring the conduct and policies of companies themselves. As a consequence, in this new landscape, a corporate brand is becoming Justice and Central, if not more so, as product or service. The public is not simply actively seeking information; it is taking action on whether to purchase or boycott a product or service, as well as whether to accept or reject a position at a company or encourage someone else to do so.
Businesses that failed to factor this redefined relationship between business and society and their governments, strategies, and communications risk not only losing customers and public support for their license to operate, but also attracting and retaining their next generation of talent.
2 – CLOSING THE GAP IN THE NEW SOCIAL LANDSCAPE
In the coming years, modes of communication will change more than they have in the previous century as businesses adopt new ways of engaging stakeholders through social networks. connecting effectively in this new landscape is less about refining and pushing out the perfect corporate message. Instead, it is more about a corporation’s interactive exchanges with stakeholders and the quality and authenticity of the engagement itself.
RULES OF ENGAGEMENT 2.0
The architecture of this quickly developing outrage provides a compelling example of the web-enabled activist environment in which business now operates. Today, a global community of engaged information-speakers can quickly form communities of thought ready to act when their expectations of the role of business and society are not met. In July 2016, a web-savvy New Yorker, Mellini Kantayya, converted her ongoing Facebook conversation with friends about EpiPen pricing into an online petition to stop the EpiPen price gouging. The petition was targeted at lawmakers and administered through the website Petition2Congress.Com. in just 45 days, the petition garnered more than 80,000 signatures and generated more than 121,000 letters to Congress. Parent activists from websites like PeanutAllergyMom.com and AllergyKids.com escalated what had begun as an individual protest into a nationwide movement.
THE PROOFS OF CHOICE: ACTIONS TAKEN AND PERSONAL EXPERIENCE
“The most potent contributor to trust is the commitment to taking meaningful action.”
The result: Trust must be earned through action not simply messaging.
The primary factor driving the Public’s opinions of business today is personal experience and direct engagement.
STAKEHOLDER IMPACT AND THE BUSINESS MODEL
As the University of Virginia Darden Graduate School of Business professor Edward Hess has shown, Companies with the highest bottom line growth are also those where all employees are aligned with the idea of the business, including understanding the company’s business strategy.
3 – INHERENT NEGATIVES: MANAGING RISK AND REPUTATION
EMBEDDED STAKEHOLDER IMPACT
In fact, according to data From he Institute for Crisis Management, nearly 78% of business crises in 2015 were not due to sudden external events but due to smoldering issues that escalated to crises when they became public. The degree of management control and responsibility is the key differentiator between sudden versus smoldering crises. While both categories of crises produce headlines, sudden crises are external events which are perceived as being Beyond management control. Smoldering crises, the category in which inherent negatives belong, are perceived as being the responsibility and fault of the firm’s leadership. “In extreme cases, and according to the the Institute of Crisis Management database, it is in fact leadership decisions and actions that form the basis of most modern-day crises — not external threats or act of God that we most frequently think of as a business crisis,” explain Erika Hayes James and Lynn Perry Wooten.
THE EMBEDDED FLIP SIDE
Dramatic reconceptualization of corporate social responsibility which transforms it into creating shared value.
“SO RIGHT AND YET SO WRONG”
During the recent multi-year drought in California requiring residents to cut water consumption by as much as 36 percent, Starbucks transferred its Ethos water bottling operations from California to Pennsylvania for theDuration of the California drought on ethical grounds, taking action to address a negative stakeholder impact. In contrast, several companies, including Nestle’s Arrowhead and Pure Life brand, continued to source water in California for bottling, inciting more than five hundred thousand petitioners in 2015 to demand that Nestle stop those operations.
ANTICIPATING INHERENT NEGATIVES
Instead, identifying inherent risks requires a concerted effort to expand a company’s internal line of sight. Internally, developing a management culture that actively guards against the insularity of a corporate culture bubble starts at the top. CEOs and an executive team that actively and visibly seek out nonconforming points of view set the tone by modeling desired behavior and making diverse point of view politically safe within the culture.
UPS AND FACEBOOK
While most customers know UPS through their familiar Brown delivery trucks, 70% of the company’s carbon footprint comes from elsewhere and its Transit Network.
UPSTREAM AND DOWNSTREAM
In addition to inherent negatives embedded in the policies governing a product or service itself, a corporation seeking to anticipate inherits negatives through the windshield should also understand that stakeholder impact of its supply chain or life cycle, both upstream (including issues such as sourcing raw materials and supplier management) and downstream (including issues such as usage and disposal).
Producing a given quantity of bottled Coke takes approximately four times as much water as what ends up in a bottle of Coke.
Predicting risk, the premise that began this chapter as the enabling basis for the modern form of business, is not going to get any easier.
4 – CORPORATE CHARACTER
“I MUST RESIGN FROM THIS GREAT ONCE GREAT COMPANY”
She also criticized the inconsistencies between Rometty’s letter to Trump and IBM’s recruitment material, which declares that the company’s future depends on realizing “an inclusive and welcoming culture.” While Rometty referenced diversity and tolerance in an email to employees regarding her letter to President-elect Trump, she omitted those topics in her actual letter to Trump, which Ms. Wood declared a “huge disservice.”
In a similar scenario, Oracle employee George Polisner posted on LinkedIn his resignation letter to the Oracle CEO, Safra Cruz, in protest of her decision to join Trump’s transition team, an action taken without an explanation given to employees. “I am not with President-elect Trump,” Polisner wrote, “and I am not here to help him in any way. In fact, when his policies border on the unconstitutional, the criminal, and morally unjust I am here to oppose him in every way possible. Therefore, I must resign from this once great company.”
FROM CORPORATE IDENTITY TO CORPORATE CHARACTER
Wally Olins, a pioneer of corporate branding, suggested that an organization is both understood and manifested through four vectors or transmitters: products and services, environment, Communications, and behavior.
COLLAPSING INTERNAL AND EXTERNAL BOUNDARIES
By early 2017, the cumulative impact from these incidents shared online was its stock trading at less than 50 percent of the ten year high it had reached in 2013, which perhaps added to the reasons Amazon targeted it for acquisition.
Still, the credo inspires a culture where a national shortage of nurses is met with the company’s offer to pay tuition for nursing school.
PIVOTAL EMPLOYEE STAKEHOLDERS
In this new ecosystem, a key factor is the relationship between top management and employees, and seeing employees as an opportunity for investment, rather than as a cost, can only enhance an authentic corporate character in which corporate vision is shared.
Employees, speaking anonymously after being warned by management not to speak to the press, met secretly to develop recommendations for Facebook management. “It’s not a crazy idea. What is crazy is for him [Zuckerberg] to come out and dismiss it like that, when he knows, and those of us at the company know, that fake news has run wild on our platform during the entire campaign season,” said one Facebook employee from its social networking division. Similarly, a former Facebook designer, Bobby Goodlate, posed on his Facebook wall, “Sadly, News Feed optimizes for engagement. As we’ve learned in this election, bullshit is highly engaging. A bias toward truth isn’t an impossible goal. Wikipedia, for instance, bends toward the truth despite a massive audience.
COMPETING FOR THE NEXT GENERATION
Another Factor driving the growing strategic importance of a corporation’s Employee Engagement and Communications has been the Recruitment and Retention of employees. This is particularly the case for millennials (those born from the early 1980s to the mid-1990s), who in 2015 became the largest share of the American Workforce, and for Generation Z (those born since 1996) who will represent 40% of all consumers by 2020. Corporate character will be a high priority for the next generation of corporate leaders, who tend to be more loyal to core values than to a particular company, making corporate character central to recruitment and retention initiatives.
Boxed, an e-commerce startup competitor to wholesaleclubs like Costco and Sam’s Club, is similarly offering to pay the college tuition of its employees’ children through a nonprofit foundation created and funded by its CEO, Chieh Huang. Referring to the company’s nearly one hundred U.S. warehouse workers, Huang explained why this benefit was a better solution than higher salary: “there’s an issue of inequality of opportunity. If you can barely afford a car and then you get a double salary maybe you can afford a car. But can you really pay four years of education for your children? When some workers texted their spouses with the new, the response from one spouse was “You can never leave this company ever.” As Huang explained, “These folks have dedicated themselves to our company day in and day out. I’m really nothing without them, so this was just my way of making the situation right.”
AN ALWAYS-ON CHARACTER AUDIT
The history behind Nike’s “swoosh” logo, which had adorned the clothing of superstar athletes more than once (just think of tiger woods cap and shirt) was particularly fortuitous. Rather than consult a large design firm and numerous focus groups, Nike purchased its logo from a local artist for a sum that would not keep a teenager in sneakers for a season, and this became part of the story of the company;s origins. A particularly fortuitous or historically resonant logo or tagline suggests a larger narrative.
Doing business requires executive leaders who model the stewardship of corporate character, asking uncomfortable, even inconvenient, questions about the alignment between a company’s vision and values and its business strategies and policies as a way of doing business. Perhaps even more important, to build an internal culture that reflects the company’s character, executive leaders must visibly reward and recognize employees who audit that alignment and flag strategic inconsistencies and make it politically safe for them to do so. As the many examples in this and other chapters illustrate, it is better to correct course before a divergence from vision and values becomes newsworthy, goes viral, and then must be managed through the rearview mirror, not the windshield.
It is not so much inconsistency per se that erodes corporate character. Companies, like people, make mistakes. Rather, it is a failure to recognize and correct the business decisions that diverted an organization from its vision and values that erodes character.
5 – THE NEW CORPORATE BRANDING
As with corporate character. A compelling corporate brand becomes more than its attributes or the sum of its parts. It not only represents how a corporation demonstrates its values and strategies through its actions but also becomes the primary connection between a stakeholder’s feelings and perceptions of the organization.
This chapter makes the case that the new social landscape has fundamentally reset the business of corporate brand building.
THE DNA OF A CORPORATE BRAND
However, a significant hallmark of the new business environment is that successful brands take on meaning through the fluid interchange between internal and external stakeholders.
A stronger way to state the notion of brand promise is to say “a brand is a contract,” a contract between stakeholders on one hand and the brand as the expression or extension of the corporation on the other.
SHIFTING CONTROL OF THE BRAND
Just as significant, in the social media ecosystem, consumers shape the corporate brand through their experience with the corporation’s products and their perceptions of the corporation’s business behavior, policies, and practices.
Expectations by aligning corporate behavior with words is a minimum requirement, without which there would be no basis for authenticity. Authenticity is achieved by an organization doing what it says it will do, reflecting the words and behavior of the entire organization. This includes not only executives’ words and actions but also service representatives’ online chats with customers or flight attendants’ exchanges with passengers during a flight. In the wired world, every personal experience counts and can quickly become a symbol of a corporation’s character. Organizations that act authentically and with integrity build trust with stakeholders. Trust alone, however, is insufficient to build an enduring brand without attachment — a personal, emotional connection that builds brand loyalty.
The pinnacle of performance for an enduring champion-brand company in the new business environment is advocacy — not advocacy in the sense of lobbying or lawyering, nor isolated to a for profit corporations strategic philanthropy, but advocacy that represents the common interests and values shared by both a for profit corporation and society. In fact, this definition of advocacy turns the long-followed marketing practice of trying to build brand advocates on its head. Advocacy in the context means being a corporation being for something that is directly relevant Both 2 advancing the Corporation and addressing the societal need. It represents a high bar: to build a strong and enduring relationship with society, a Corporation has a self-interest to champion matters that are important to both itself and society — a shared advocacy.
TAKING POSITIONS
L.L. Bean, which had not endorsed any candidate, found itself the target of an online boycott (referred to with the Twitter hashtag #GrabYourWallet) after an heiress to the bean fortune became a public advocate of and donor to a pro-Trump political action committee. The L.L.Bean online boycott triggered a tweet from Donald Trump encouraging support for the company, which served only to increase the controversy’s visibility. New Balance found its brand similarly caught in the partisan crossfire, with a brand boycott accelerated by a neo-Nazi blogger calling New Balance shoes “the official show of white people.” The stunning velocity of these boycotts – no matter the inaccurate, confusing, or nuanced facts involved in triggering them – demonstrates that any corporation and corporate brand are now intricately woven into the social fabric of popular culture.
While a B Certified Corporation can be any type of for-profit legal entity, for example a for profit law firm, a benefit corporation is a type of corporation authorized by thirty one states in the United States and the District of Columbia, thereby providing the legal protection of a government recognized legal entity. A benefit corporations directors and officers are required to consider the impact of their decisions not only on shareholders but also on society and the environment. Patagonia is both a B Corp, first certified by B Lab in 2011, and a benefit corporation as of the first day in 2012 when that status was legally effective.
BALANCING THE INTERESTS OF SELF AND SOCIETY
This can be seen in one of Coca-Cola’s more forward leaning examples of sustainability, the EKOCENTER. These self-contained units, originally constructed from shipping containers, are brought to remote locations in Africa, Asia, and South America that do not have town centers. They provide water purification, electricity, and Internet access, and, while not branded with a logo, they also have Coke for sale. The aim is neither to make money or lose money. The EKOCENTER lies perhaps somewhere between philanthropy and corporate brand building,
EKOCENTERS purify water with “slingshot” technology.
All of this is part of Nooyi’s Philosophy for conducting business in the 21st century in a way that unites and advocates for the shared interests of business and society. She states, “To succeed in today’s volatile and changing world, corporations must do three things exceedingly well: focus on delivering strong financial performance, do it in a way that is sustainable overtime and be responsible to the needs of society.”
SHARED SOLUTIONS
Unilever’s Focus on finding shared solutions even extends to changing its customers’ behaviors. The company found that 68% of the greenhouse gas emissions from the carbon footprint of 2000 of its products occurred once the products were downstream in the hands of customers, primarily from heating water; for example, heating water for tea, washing one’s hands with soap, and washing one’s hair with shampoo. One solution to reducing the downstream carbon footprint from customers using its existing products is to change consumer habits, like encouraging shorter showers. Another is to invest in research and development in profitable new products specifically designed to consume fewer natural resources when used. For example, Unilever’s dry shampoos work when combed through the hair, not as a total replacement for a traditional hot water shampoo but as a water saving, convenient alternative in between shampoos.
SMALL AND MEDIUM-SIZED ENTERPRISES
Whether for large or small businesses, in today’s landscape, the new corporate brand accrues in value based on the quality of a corporation’s stakeholder relationships, with the stakeholders themselves driving the corporate brand narrative: customers shape of ran through their experience with it, employees through their relationship with both peers and management, non-governmental organizations through their public comments on the organization’s behavior, and so on.
Today, sustainable and enduring corporate brands must profitably deliver products and services in a way that also benefits society, addressing the intersection of where its operations, scale, and capabilities can also positively transform unmet social needs.
6 – REPUTATION LOST AND FOUND
CROWDSOURCED RATINGS AND RANKINGS
Responsiveness of a company’s customer service employees and its track record of honoring warranties.
Rather than sudden events like tempering, according to the Institute for Crisis Management’s annual reviews, crises from smoldering issues within management’s control are more common, but often not detected before they erupt. Wells Fargo’s fraudulent banking account scandal, for example, smoldered within the company for years without substantive management intervention until it spiraled into a crisis due to a Los Angeles Times investigative report.
FINDING COMMON GROUND
to give one example, the 2016-17 fake news controversy involving Google or a social media giant like Facebook demonstrates the “stickiness,” Visibility, and attractiveness of oppositional crises are just as relevant now as they were during the Aetna crisis, which occurred just at the cusp of this new era. In an oppositional crisis, businesses that get baited into prioritizing “winning” the debate by defeating their critics will only ensure the debate continues. That mindset puts them on the defensive, responding to critics who then ultimately control the narrative. The media — social media, establishment media, mainstream media, alternative media — welcome that approach. Controversy is not only urgent and interesting. It drives media revenue.
A key lesson from Aetna’s crisis management strategy, however, is that the company did not seek to win the debate, but you ended through a business strategy based on finding common ground.
Dow Corning’s Crisis was focused on the company’s silicone breast implant products, which never represented more than 1% of its business. The insularity of being a privately held, predominantly business to business company combined with the assumed limited business impact of breast implants left the company unprepared for a tsunami of public outrage when the trial bar invested its tobacco and asbestos winnings into their next mass litigation target.
It was not a matter of Dow Corning Suddenly adopting more proactive communication strategies, as some analysis of the breast implant crisis case had surmised. Instead, the change was enabled through a new management approach to the crisis through critical strategic business decisions and constructive actions first initiated in 1992, with the results from those decisions and actions slowly emerging in 1995.
APPLYING LESSONS LEARNED
Aetna’s and Dow Corning’s lessons learned in restoring their Reputations have important similarities directly applicable in the new social landscape: a multi-functional executive management team with the authority to strategize and implement a platform of constructive solutions leading to a common ground with critics and stakeholders; a strategic pivot from a defensive posture with critics to a position of advocating what the company is for, not what it is against; And a leader in leadership team able to understand the stakeholder perspective, offering a new lens through which the crisis could be understood , managed, and communicated.
7 – RESETTING THE SWEET SPOT
A NEW EXECUTIVE LEADERSHIP MINDSET
Anticipating stakeholder impact in this new era requires ongoing vigilance as a way of doing business, but understanding that impact can be illusive. IN their thought-provoking report, Thinking the Unthinkable, author Nik Gowing and Chris Langdon interviewed 60 prominent corporate, public service, and political leaders regarding new vulnerabilities they are facing. The majority of those interviewed argued that today’s speed of change requires new executive leadership skills to anticipate strategic surprises. In particular, the executives interviewed warned of a leadership aversion to address “unpalatable” risks to their business, creating a “willful blindness”
RESETTING THE SWEET SPOT
Delivering a product or service that meets a customer’s needs through profitable business strategies that also benefit society.