It was the hot business trend going into 2020—companies recognizing the value of increasing diversity at all levels, aligning with more social issues important to customers, and developing a stronger culture for employees. And now…
Welcome to the first true test of the so-called purpose movement. After more than a year of solid momentum built around the notion that corporations need to move beyond just the bottom line, their efforts to satisfy more stakeholders are in obvious jeopardy. Directors know all too well that business is heavily occupied with the revenue and operational end of the equation in today’s environment.
Tierney Remick, vice chairman of Korn Ferry’s Board and CEO Services practice, says despite the dire financial outlook, neglecting purpose now could be a mistake. She says bringing the community together to work in concert against the challenges brought on by the coronavirus could become a rallying cry for an organization’s employee population. And that’s where boards can help. Remick says boards can help management reinforce purpose by helping leaders find solutions to keep the organization’s culture and strategy anchored to more than just financial performance during this difficult time.
“Maintaining purpose now can be a true differentiator for organizations that will stand up well when the crisis is over,” says Remick.
The purpose movement has no doubt been one of the most powerful forces changing business in recent years, rivaling digital disruption. Momentum for equal pay, diversity and inclusion, and sustainability reached something of a crescendo last year among consumers, employees, and investors. Nearly 200 CEOs signed on to a statement from the Business Roundtable proclaiming that shareholder value is no longer an organization’s overarching priority, for instance. BlackRock, which has $6 trillion in assets under management, said it wanted more women appointed to boards, and a social return as well as a financial one from the companies in which it invests.
Kate Shattuck, co-leader of Korn Ferry’s Impact Investing practice, says putting financial goals over purpose commitments now could be disastrous for these leaders and their organizations. By way of example, she says that despite new laws in the United States that require female representation on public company boards, noncompliant organizations could use the coronavirus as an excuse for delaying appointments. “People who care about purpose will be watching," says Shattuck. "If business leaders hedge or put asterisks around their commitment because of a tough year, they will lose credibility and goodwill."
To be sure, the outbreak underscores much of what the purpose movement is about. Taking care of employees, physically and mentally, is a core tenet, for instance, as is providing a healthy work-life balance so employees can take care of family members, and contributing positively to the community. Rather than retreat from purpose, boards can help leaders think about where their organizations are uniquely aligned to contribute and help during the outbreak, says Jane Stevenson, vice chairman of Korn Ferry’s Board and CEO Services practice. “Maybe companies can’t fulfill all their goals,” Stevenson says, “but leaders can use this as an opportunity to get creative about ways to honor their purpose.”
Shattuck agrees, saying the coronavirus outbreak can ultimately strengthen rather than weaken an organization’s purpose. She adds, however, that it’s easy to be committed to social impact when things are good. To really show that organizations and leaders are authentic in their desire to demonstrate how positive social impact is equal to financial performance, they will have to prove it “when things are bad.”