Nothing Personal, Just Business. Or is it?
The strategy and actions of a "for-profit" organisation have always been driven by the financial revenues and share values they can deliver, as well as the predicability and stability, reassuring these values are only going to grow. The pressure to be profitable often requires the delivery against short-term goals and profit is regarded as one of the ultimate KPIs we measure success against. Setting aside the moral question whether being profitable at any cost is right, let's explore whether this is sustainable in the world we live in today?
Companies today are gaining an unprecedented power. Some have revenues larger than the GDP of entire countries. For example, Netflix had a greater revenue in 2017 than Malta's GDP and Walt Disney's takings exceeded Bulgaria's GDP. This colossal power also comes with a huge responsibility.
"50 years ago, 85% of the S&P 500 companies' assets were tangible assets - buildings, plants and machinery. Today, 88% are intangible assets: brands and reputation, and in particular, human assets." said Prof. Colin Mayer, during the Responsible Business Forum in Oxford, 2019, dedicated to The Economics of Mutuality. This is an extremely interesting statement, as he goes to focus on the ownership of these assets and the difference between being able to own the tangible and the inability to own the intangible: employees, nature etc.
With the realisation that our tangible resources are finite, that companies are dependable on assets they don't have ownership on, and that our planet is on fire, companies find themselves in the uncomfortable position to question their values, purpose and measure of success. They are forced to take a stance - either actively participate in improving the environment you operate in and the lives of people who buy your services, or face the consequences.
From Shareholder to Stakeholder Value
The leaders of today can no longer focus solely on the interest of their shareholders. They now have to think about the interest of all stakeholders: what are the personal values of their consumers, employees, and investors and how they might be changing, what is important to the communities, and what is good for the planet. Consumers and employees have become a lot more demanding towards brands. They don't just consume a product or work for a company, they want to identify with the idea and the cause that company supports. Just as consumers have become more ethical in the way they consume, so have companies started to look for ways to be more ethical in the way they source labour and ingredients and how much they pollute the environment.
But how do we move from shareholder driven strategy to one that will benefit the community and the environment?
Economics of Mutuality
Some leaders and researchers had the foresight to start thinking about the future of management and how our economic system, corporate vision, goals, structures and actions should evolve, so that companies can be profitable and also deliver value to all their stakeholders.
Mars Catalyst in cooperation with top universities around the globe and Saïd Business School, the University of Oxford has been working on the new management method, Economics of Mutuality, for the past decade.
Economics of Mutuality is an approach that can deliver greater value to society and the environment and also deliver superior business returns — a ‘win-win-win' for all stakeholders in a corporate value chain.
Olivier Goudet CEO JAB and Chairman AB InBev
Organisations now have to shift their goal from Financial profit to Mutual profit and while this is still a work in progress, it's an important realisation a lot of companies are yet to make. This means potential change in governance, structure, financing, ownership. Can this concept of responsible capitalism be the answer? We have no choice but to try it and improve it as we go. Our world from now on will be one of constant iteration and change and standing still, or worse, looking back, will never be the right answer.
Curious? Read and watch more here:
Oxford Session: Introduction to Economics of Mutuality
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