Ethics are key to survival and growth
As the recession bites and business leaders get their bearings, it’s tempting to put values aside and seek short cuts to recovery. Writer and governance
specialist Anthony Smith-Meyer recommends that ethics remain a driving force, not just for the good of society but also for economic survival and long-term growth.
My colleague, Professor Ludo Van der Heyden of INSEAD, the European Institute of Business Administration, once explained that while catastrophe is something that happens to us, it is humans who make a crisis of it. The very notion of a crisis implies that we are faced with conscious dilemmas and hard choices; it is the awareness that our actions have consequences that shape the nature of the crisis before us. An outbreak of Ebola virus, for example, is a catastrophe for the society and people it affects, but it is our efforts to contain it and tend to those who need help that require crisis management. The Covid-19 crisis is occurring at a number of levels – in healthcare, politics, democracy and the economy, across national, industrial and individual levels.
This new crisis has interjected itself into a trendline which has been evident for some time. Many of us have been talking about stakeholder capitalism and ethics for almost a decade. Ethics provide the foundation for a new economic world order where climate, wellbeing and society are as important as the bottom line.
Crises will always reveal the cracks, and the fallout from Covid-19 is going to really expose cracks in companies and, indirectly, any selfish behaviour being practised. However, turning to ethics in a crisis is not a quick fix. Ethics need to be something you’ve invested in before – a compass as the waters get stormy and checklists for difficult decisions.
It’s tempting to go back to crisis actions, tried and tested in previous storms, but no crisis situation is like any other. Not only is the world constantly changing but the needs of future consumers have changed exponentially. Leaders cannot simply revert to past behaviour, or they miss the writing on the wall.
Learn from the future
Those not paying attention to social trends are going to end up being seen as short-term con artists out to make a quick buck from a new kind of consumer. The emerging generation Z have been brought up in a world marked by financial crisis, austerity and now the pandemic, and their influence is spilling over to the millennials. As a recent McKinsey report found: “Coupled with technological advances, this generational shift is transforming the consumer landscape in a way that cuts across all socioeconomic brackets and extends beyond gen Z, permeating the whole demographic pyramid.”
Put simply, they don’t believe the hype. New generations are looking for transparency: “What’s the real impact you’re having on my society and on my world?” Generation Z don’t just want to buy a brand because it’s fashionable, they want to associate with the ideas and the values behind it – consumption anchored on ethics. Authenticity is everything to a new, idealistic breed of consumer that expects brands to stand for something.
Fortunately, some companies are beginning to understand that reputation will generate business in future. They’re the ones who are going to capture the imagination – and purchasing power – of young people going forward. The ones yet to grasp the message will go down with the ship. I’m convinced we will see a huge shift in the next five years, with certain companies falling by the wayside.
So, what to do if tight budgets mean choosing between, for example, sustainability and keeping an employee on? Stakeholder capitalism should mean acting responsibly towards your personnel, trying to keep them on board rather than just letting them go. If such hard decisions must be taken, it’s still vital to consider the consequences of what you’re doing and try to mitigate the impact as far as you can by, for instance, helping people with retraining. Difficult decisions should be made with an authentically heavy heart and only after weighing up all the alternatives.
If this isn’t happening, then either the board is weak or the CEO only cares about themself and their short-term gain. If the board realise this, they should talk to the CEO, convince them that the way in which success is going to be measured is changing and see if they are willing to adapt. If not, seek new leadership. It’s better to part with that person now and get someone on board who really wants to do the right thing, but maybe needs a bit of extra support.
Finance professionals are key here as not only can they provide much-needed support to leaders, they are also essential in helping the business stick to its values while firefighting, and they can be invaluable in helping the executive board maintain focus.
In their excellent book Lead from the Future, Mark Johnson and Josh Suskewicz aim to help leaders to think beyond the short term. The authors caution them to avoid “present-forward thinking”, which leads to repeating old mistakes. Rather, they ask you to think “future-back”. Think about where you want to be in a few years’ time and ask, “What do I have to change now in order to get to that future?” By thinking this way, you are starting to work on the right skills and strategies. It’s a way of reasoning I’d recommend to all businesses right now during this current economic climate – and the key to this is thinking ethically today about who you want to be tomorrow.