Thursday 19 November 2020 4:44 am

How to think long-term when your shareholders won’t let you

Dave Allen is founder of Brandpie

Before the Covid-19 pandemic, my team conducted a study amongst nearly 700 business leaders across the US and Europe. 

The results uncovered that 76 per cent of chief executives think businesses need to shift focus from short-term profit delivery to long-term value creation. 

But so far less than five per cent have made that shift. Why?

Uncertainty about the future and increasing pressure from shareholders to survive the present moment can make the move feel like a pipe dream. But even amid the most uncertain period of history in our lifetimes, the transition is possible. 

All a chief executive needs to believe is that becoming purpose-driven can unlock employee engagement, innovation and growth. 

Those who are ready to pursue long-term value creation need something to drive their business forward: a clear purpose does that. We discovered chief executives whose business has a purpose can respond more quickly and effectively to short-term concerns to benefit share and stakeholders — including employees, investors and customers — across the board. Purpose seems to enable more confident decision-making. 

Purpose provides clear direction

The world is increasingly rife with uncertainty. Businesses must find a way to offer some sense of security, to shareholders and stakeholders — and purpose is the path to that security.

Organisations that have defined a clear purpose seem better able to address, respond to, and pivot in the face of unexpected events.

Look at The Body Shop. Its purpose is to fight for a fairer, more beautiful word. In our interview with chief executive David Boynton for our podcast, he talked about how the pandemic was an opportunity to conduct an “inventory” of the business, for which purpose offered a valuable guide. 

Now more than ever, employees are willing to call out surface-level purpose statements. But this can be an opportunity. Boynton says having a clear purpose has made him more ambitious as a leader, rather than more cautious. Having purpose means brands are both less likely to make “cancelable” choices, and confidently prepared to respond to issues and challenges as they arise. 

His strategy has worked: Boynton is responsible for getting The Body Shop a B Corp certification and generating triple bottom-line growth.

Pivoting with purpose

As the Covid-19 crisis continues to throw uncertainty after uncertainty in the face of leaders fighting to keep their businesses alive, purpose can be a life-saving tool. 

To survive at the moment, businesses constantly need to react to rapidly changing market conditions and evolving stakeholder demands. The pandemic has underscored to many of us just how effectively purpose can guide a business through making fast short-term changes. These uncertain times have also challenged businesses to recognise that purpose incorporates more than just something to stand for, but a way of acting, and focusing on service and fulfilment of need. 

In the early days of the pandemic, companies like BrewDog, Ford, and Virgin Orbit stood out for their swift and apparently seamless transition to providing hand sanitizer, PPE, and respirators. GoDaddy produced a programme to help small retailers open an online store in just 18 days, saving many small businesses in the process. To move so fast, you have to know why you exist. 

Being purpose-driven enabled all these businesses to respond to the evolving situation and quickly adapt to new, entirely unexpected needs for the greater good of society and their business. 

Playing the long game 

Midway through the second period of national lockdown, none of us know what will happen over the coming months and years. With so many issues now affecting how companies conduct business — the pandemic, Black Lives Matter, diversity, sustainability, climate change, remote working, technological disruption — it’s hard to navigate through and guide your business to growth. Having a clear purpose provides a compass to help you, your team and your employees as you go step by step on the journey.  

Whatever the new normal becomes, it will be those businesses with a strong sense of purpose that will embrace it and succeed.

Main image credit: Getty

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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