When Profits Don’t Matter (as Much)

For investors in Microsoft, Facebook, Twitter, or Amazon, there probably will be only good news this week. Whether the firms beat or miss analysts’ expectations when they announce their quarterly earnings, the group likely will report a combined revenue of more than $100 billion and net income well north of $30 billion.

But for other stakeholders it may be a different story. Indeed, for better or worse, the four firms—along with Google parent company Alphabet—represent far more than just profitable organizations. Indeed, their names alone bring up conversations about privacy, employee wages, free speech, cybersecurity, harassment, and a slew of other issues dominating American discourse. For the firms’ leaders, it’s a delicate balance, keeping shareholders happy while potentially addressing issues in ways that may hurt profitability.

“Leaders don’t necessarily think that their organizations will become synonymous with major issues,” says Craig Rowley, a Korn Ferry senior client partner.

Some experts believe that because tech firms have grown so huge, at some point they inevitably would become controversial on some subject. In that regard, they aren’t much different from Big Oil firms and their role in climate change, or Big Pharma and the state of US healthcare. Others, however, say that’s putting the cart before the horse. There wouldn’t be a national conversation about online harassment had there not been social-media channels such as Facebook and Twitter. There’s historical precedence in tech with that line of thought. No one complained about a monopoly in computer operating systems in the 1970s until IBM invented one and most everyone bought it.

Microsoft may have a little more experience in this issue than the other three firms. At nearly 44 years old, it’s downright ancient compared to Facebook and Twitter, and a generation older than Amazon. Many still remember how talking about Microsoft in the 1990s often veered into a debate about what constitutes a modern monopoly.

Experts say that these firms should fall back on one leadership cornerstone—transparency—whenever these issues, and how they impact the business, arise. Leaders need to be open with stakeholders—whether its investors, employees, customers, or anyone else—about what their firms are doing and why they are doing it. Leaders can also recognize that they may not have the answers right away. “These are tough issues and there are experts out there who can help,” says Sid Cooke, a Korn Ferry senior client partner.

These actions may not win over any single group in the short term, but experts say it can increase the loyalty of employees, encouraging them to work harder to devise solutions to the challenges a firm is associated with. Plus, successful firms may get some slack from customers if they feel the organizations are acting authentically. “Consumers, whether they’re people or organizations, helped you get so big over time, so you’ve earned a little bit of trust from which you can draw,” Rowley says.

Authors

  • Craig Rowley

    Senior Client Partner

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  • Sidney Cooke

    Senior Client Partner

    Bio >