CIPR House of Commons debate places PR at the heart of organisations

Tonight I had the privilege of representing the CIPR at a House of Commons Debating Group event. Chaired by The Rt Hon Lord McNally, we debated whether ‘Business best serves society by focusing on the bottom line.’ For the motion was Dr Jamie Whyte, research director at the Institute of Current Affairs and Valentina Kristensen, director of growth and communications at Oaknorth Bank. I opposed the motion with the support of Professor Anne Gregory, chair of corporate communication, Huddersfield Business School. Here are my two arguments in full, which show exactly how intrinsically linked public relations is to organisational strategy and how placing people before profit is better for generating financial return over the long-term.

OPENING ARGUMENT

Business best serves society by focusing on its bottom line.

Tonight I’m going to wholeheartedly and fervently argue the opposite.

And I’m going to start with Guardian coverage of a report that was published by the United Nations just ten days ago.

“The UK government has inflicted “great misery” on its people with “punitive, mean-spirited, and often callous” austerity policies driven by a political desire to undertake social re-engineering rather than economic necessity, the United Nations poverty envoy has found.

“Philip Alston, the UN’s rapporteur on extreme poverty and human rights, ended a two-week fact-finding mission to the UK with a stinging declaration that despite being the world’s fifth largest economy, levels of child poverty are “not just a disgrace, but a social calamity and an economic disaster”.

Let’s take a couple of seconds to digest what we just heard.

“A social calamity and an economic disaster”. If that doesn’t speak to the need to place people above profit, nothing ever will. And when the government doesn’t make the general public its priority, this is exactly the situation we find ourselves in. A society more aligned to 1918 than 2018.

When society’s needs aren’t being fulfilled, we need businesses to step up and give back – remembering that they have a civic duty too.

 

Organisational purpose

If we want to talk about business best serving society by focusing on the bottom line, we need to understand the purpose of organisations first.

According to the Chartered Management Institute, organisational purpose is:

“An organisation’s meaningful and enduring reason to exist that aligns with long-term financial performance, provides a clear context for daily decision-making, and unifies and motivates relevant stakeholders.”

This means profit generation that is focused on and benefits all connected to the organisation. Not just in the management team’s interests so they can take more home in their pay packet.

Surely no one here can justify the obscene £265m Bet365 founder Denise Coates paid herself in 2017, more than a third of the betting firm’s annual profit. Does that sit ok with everyone here? Surely there is a point when enough money becomes too much money, especially with that type of discrepancy between your salary and what you pay your employees.

When you consider the CIPR’s own definition of what we do, in terms of being “the planned and sustained effort to establish and maintain goodwill and mutual understanding between an organisation and its public,” it becomes very clear how relevant organisational purpose is to public relations.

The work we do is interconnected and as reputation guardians, it falls to us to help business do the right thing.

 

Social purpose matters

Organisational purpose outside of money making is important.

Not least at times of prolonged austerity and political, societal and technological change, like we are experiencing now.

If you need the commercial imperative outside of ‘doing good’, this type of change acts as a flashpoint when relationships between organisations and the public change and consumers scrutinise where to invest their hard-earned cash.

They seek brands aligned with their values and which, recognising their customers’ daily challenges, are committed to alleviating these.

Businesses not living their values risk being called out publicly, with the reputational damage and negative impact to the bottom line that results.

Critically, it’s not just me saying this. Social purpose is an issue rising up the corporate agenda.

Unilever’s Paul Polman has been quoted as saying “capitalism can no longer prosper at the expense of society.”

Blackrock’s Larry Fink is also the perfect case in point. At the start of the year he sent an anniversary letter to CEOs saying:

“Society is demanding that companies, both public and private, serve a social purpose. Companies must benefit all their stakeholders, including shareholders, employees, customers and the communities in which they operate.”

If the leader of one of the world’s leading asset management companies is saying this, it’s time to sit up and listen.

 

Profit and purpose aren’t mutually exclusive

Crucially, my biggest argument against tonight’s motion that business best serves society by focusing on its bottom line, is that profit generation and organisational purpose don’t have to be mutually exclusive.

Just look at businesses which do well by doing good such as Patagonia, whose purpose statement is to “build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”

The clothing brand reached over 750 million dollars in 2017 revenue all without even running a single TV ad. When it did advertise on TV it was nothing about clothing. Every time Patagonia amplifies its social mission, it grows.

Nike’s recent decision to use Colin Kaepernick as the face of its national campaign may have ruffled feathers, but taking a stand and doing the right thing saw its stock soar – in the bank holiday weekend alone after the ad launched, online sales grew by 31%, despite some protestors burning Nike apparel and stating that they’d never buy ever again.

And in a very simple but lovely example, Dominos in the US has taken to filling in potholes (admittedly stamping the Dominos logo on top), recognising that people want to enjoy their pizza in a fit state when it’s delivered to their home. A fantastic campaign stunt which has garnered them column inches and a heap more sales, as well as increased customer loyalty. Social purpose equals win-win.

 

There is a demand for corporate purpose

In The Power of Purpose John O’Brien and Andrew Cave set out five drivers behind the increased demand for corporate purpose outside of wealth creation:

1.   A need for established companies to find new, authentic ways of creating sustainable value across all stakeholders

2.   Entrepreneurs wanting to demonstrate a deep sense of personal purpose as they carve out new areas of business and social enterprise

3.   Government agencies looking to create collective communities of purpose-driven people, engaged in civil society

4.   Individuals looking to make an impact on the people and issues they care about

5.   Charities and NGOs wanting to create clarity around their rationale and operations to deliver enhanced impact

This is echoed by the Chartered Management Institute.

Its ‘The What, The Why and The How of Purpose’ report, states purpose is a powerful business tool which can:

1.   Increase legitimacy

2.   Attract and retain talent

3.   Drive strong stakeholder and customer relationships

4.   Increase employee psychological welfare

5.   Increase business performance

 

Accountable leadership is critical to a healthy society

Seventy years ago, the rationale for founding what was then the IPR was to achieve mutual understanding and good relations.

The Institute’s fathers came from local government had accountable leadership and social purpose at the front and centre of their work. It’s a focus we are now returning to.

It’s an important role. According to the Word Economic Forum’s Survey on the Global Agenda, 86% of respondents believe there is a leadership crisis in the world today.

Edelman’s Trust Barometer 2018 reports that trust in business is down to 43%.

Only a quarter of the population now trust social media as a source of news and information.

Public relations practitioners are well placed to help organisations find their ‘why’ and agree their ‘how’ – and most of all build long-term, sustainable relationships between an organisation and its publics based on two-way engagement, transparency, authenticity and trust.

We can help organisations find their purpose outside of wealth creation and it’s what I’d urge you all here to do too.

I’m going to close by reminding you of the definition of organisational purpose according to the Chartered Management Institute. This is:

“An organisation’s meaningful and enduring reason to exist that aligns with long-term financial performance, provides a clear context for daily decision-making, and unifies and motivates relevant stakeholders.”

I’m absolutely certain that stakeholders aren’t motivated by the ever-increasing size of director pay packets. People want to know how companies are playing their part in making our world a better and happier place to live in.

Thank you.


ARGUMENT TWO 

I spoke earlier about organisational purpose and the various drivers for this outside of purely making money.

I’m keen now to share the perspective of the CBI to demonstrate that senior business leaders also think that a focus on more than the bottom line is critical to improving the reputation of business in society.

In Josh Hardie’s foreword to “Everyone’s Business Tracker”, published in September 2018, he says:

“During a time of huge political and economic uncertainty…the public are increasingly looking towards businesses for leadership. 92% say businesses should take a stance on key social issues.”

 

He goes on to state that: “To deliver consistent, sustainable improvements in business reputation, companies must not only prevent future scandals, but also focus on the issues the public care most about.”

As in, there are a myriad of ways in which businesses can best serve society outside of a relentless profit drive.

We can all think of examples where businesses, trying to drive up margin, have cut corners to the detriment of their employees and wider stakeholders.

It happens across every industry, from construction to residential care homes. In fact, The Guardian reported last Friday that companies running inadequate UK care homes make £113m of profit, despite the vulnerable people in their care being badly neglected according to the Care Quality Commission.

In July of this year, it was reported that Barclays, HSBC, Lloyds and Royal Bank of Scotland were due to report bumper profits of £14 billion pounds but despite this, customers would still be stuck with easy access savings accounts paying less than 0.5% interest on average.

How is that acceptable in this time of austerity where poverty and food bank usage is now firmly part of daily life? How can those working three jobs and living on the edge ever break the cycle?

The worst example in recent history that I can think of is Grenfell Tower, where a fire caused by flammable cladding – a cheap option chosen by the local authority - resulted in the deaths of 72 people.

72 people could still be alive today if the council had made people its priority, rather than the bottom line.

 

Media influences opinion

In “Everyone’s Business Tracker”, it becomes clear that the media is influential in forming people’s opinions, not that there was much doubt.

Headlines about scandals and public campaigns on business issues drive the public’s view of business priorities.

I quote directly:

“As a result, the public now place a higher premium on businesses that work with ethical suppliers and that are taking action to reduce unequal pay – each gaining two places in prominence. This change serves as a clear demonstration of the impact high-profile debates have on the public’s priorities for business.”

A few pages on, the report goes further: “The public want business leaders to take a more meaningful and proactive stance on issues such as the environment, immigration and equality. Despite the sustained improvements in the public’s views of CEOs, a considerable proportion still believe business leaders are out of touch with wider society (67%) This disconnect is founded in the perception that business leaders are founded by self interest….Business leaders who speak out authentically and take a stance on issues which matter to society are likely to be viewed more favourably.”

My take out is this – organisational purpose is no longer a nice to have. The public expects it.

The general view appears to be: you don’t serve society by focusing on the bottom line, you only serve yourself.

I’d like to go back to my argument that profit generation and purpose aren’t mutually exclusive. They have benefits for all.

It is more than possible to drive social good with an expectation of commercial gain.

 

Purpose-driven companies evolve faster

According to a Forbes article by leadership strategist Caterina Bulgarella, purpose-driven companies evolve faster than others.

How? Because while purpose can express what an organisation aspires to be and do, at a more advanced level it becomes a conscious expression of how it intends to evolve and transform.

It nudges the organisation to address inconsistencies in its own culture. What we might call the say-do gap.

Doing good in society can provide companies with the motivation to innovate and provide a different, better type of product or service. Take IKEA whose purpose is to ‘create a better everyday life for the many’.

If a large retailer can place purpose at the heart of its business and make life better for those it serves, anyone can.

As I draw to a close, I’m once again going to remind you of the very definition of organisational purpose according to the Chartered Management Institute. It is:

“An organisation’s meaningful and enduring reason to exist that aligns with long-term financial performance, provides a clear context for daily decision-making, and unifies and motivates relevant stakeholders.”

 

It is a way to make money, yes, but one that unifies and motivates relevant stakeholders.

Keep that in mind as I share this quote from Eleanor Turner, head of corporate reputation and purpose at Porter Novelli London:

“It’s the companies that have a clear purpose, beyond profit, that have the greatest resonance with consumers. When identifying what their purpose is, in order to be authentic and relevant, it’s critical that a business identifies those issues most pertinent to it. Articulating this purpose is more important than ever, with there being an overwhelming call from consumers for business to play a role in the discussion on social issues.”

 

What she said.

Thanks for listening.