First published in Society Matters magazine, by Mark Chambers, Associate Director, Institute of Business Ethics (IBE)
Purpose was a hot word even before the pandemic. The widespread frustration that a too narrow focus on short term shareholder interests was producing outcomes that were not always good for society or the planet had finally found momentum. Distilling a company's reason for being into a purpose statement was a helpful response to the challenge of better demonstrating its wider role in society.
The push back on established notions of shareholder primacy also helped draw attention to the advantages of other business models where the distinctions between the interests of owners, customer and employees are less stark.
The pandemic has only accelerated these trends.
Many companies cited their newly drafted purpose statements as being a vital ‘North Star’ through the crisis. There is no doubt that having a clearer answer to the question of why they are in business helped generate inspiration and focus internally, but exactly how much did those catchy few sentences on the inside front cover of the annual report really influence what was happening on the front line?
The past 18 months saw a period of unprecedented empowerment, with local decisions being taken by local teams under extraordinary pressure and faced with unprecedented levels of ambiguity and uncertainty. From the first days of the crisis, rules went out of the window. Confidence that the right decisions were being made was entirely dependent on how well those noble statements of purpose had been translated into target behaviours and culture throughout the organisation.
All of the major corporate governance codes reinforce the vital role of the board in establishing culture and values. Strong and consistent corporate cultures don't come into being by accident but require purposeful shaping. Whether designed on purpose or not, every business has its own culture and local micro-cultures will grow in the absence of a top-down programme to influence it.
Culture is a vital enabler and a key differentiator in business. The right corporate culture is key to delivering on a company's purpose. It helps build trust with customers, suppliers, regulators and other external stakeholders. Internally, it ensures consistent decision making, helps unlock discretionary effort and is key to building a local workforce.
At the IBE, we help businesses deliver on their purpose by embedding their ethical values. Most organisations have a mix of business values (like 'reliability' or 'innovation') and ethical values (like 'responsibility' or 'integrity').
A strong, consistent culture can only be achieved when those values are embedded and reflected in the day to day behaviours experienced throughout the organisation. This requires committed leadership and a comprehensive programme of training and engagement, including mechanisms that encourage colleagues to speak up when things don’t feel right.
But culture is hard to assess. It is not measured consistently or comprehensively, nor do many companies report in a truly transparent fashion on their culture, its effectiveness and how it is aligned to, and supports, their strategy. Many companies offer cultural disclosures which are limited, selective and are hard to benchmark. The success of services like Glassdoor shows the demand for more objective insights.
In a post-pandemic world, with some element of hybrid working the norm for many employers, talent will have a choice. Increasingly, people want to work for organisations with a clear social purpose and whose values they recognise and share.
Embedding those values requires a sense of purpose.
For more information please visit ibe.org.uk/knowledge-hub/business-ethics-blog.html
The views, opinions and positions expressed within guest blogs are those of the authors and do not necessarily represent those of the BSA.