Values Are The Key To Long Term Business Growth And Survival
In the long run a company’s values are the key to growth and survival. There are no guarantees prominent companies will last and keep their position at the top ad infinitum. Only 12% of companies on the Fortune 500 list in 1955 were on the list in 2014 and whereas half a century ago the life expectancy of a firm in the Fortune 500 was around 75 years, now it’s less than 15 years and declining even further.
In January 2020 the Australian Business Review headlined with “proof moral capitalism is now mainstream.” Despite moral capitalism becoming increasingly prominent on the corporate radar, we see too many companies drop the ball. Underpayment of employees, to give one example, has become endemic in Australia with companies such as Zara, Woolworths, Commonwealth Bank, Michael Hill and Super Retail Group (Rebel Sport is a subsidiary), just some of the big names to have hit the news recently for wage theft.
Where Gordon Gekko in the movie Wall Street once cooed “greed is good,” today is a different story. We have come to expect that companies have a greater responsibility which goes beyond their shareholders, but to all their stakeholders (including employees). Sir Richard Branson of the Virgin Group has always put his employees first, advising “take care of your employees and they’ll take care of your business.” As Fortune article End of Shareholder Primary Part III: CEO Daily put it, “in the long run, shareholder interests and stakeholder interests converge.”
Former Australian Competition and Consumer Commission Chairman Graeme Samuel AC has stated that ASX200 companies need to reflect upon and change their behaviour, and implement ethical leadership. Values come from the top, so it is incredibly important to have a leader – not just the CEO though, but the board too – who recognises ethical leadership as paramount to an organisation’s health. A leader’s behaviour is equally as important as their business acumen. Samuel’s words are just not smart advice or a warning, they are the key to ultimately outperforming your peers. Consider this… Havas’ Meaningful Brands study in 2019 found that brands viewed as making the world a better place outperform the stock market by 134%!
Sustainability has become incredibly important too in this conversation. More and more consumers are demanding brands align with their values. A 2017 study by Unilever revealed that a third of consumers are now choosing to buy from brands they believe are doing social or environmental good. In its 2015 Global Corporate Sustainability Report, Nielson found that “66% of global consumers say they are willing to pay more for sustainable brands” and 73% of Millennials say they are willing to pay extra for sustainable offerings. It is even more important to Generation Z (aged approximately 14 to 22 years) – according to Porter Novelli/Core – with 90% indicating that they believe companies must act to help social and environmental issues and 75% will do research to see if a company is being honest when it takes a stand on issues. These figures are likely to be higher in 2021, with a recent IBM report revealing “93% of global consumers say COVID-19 influenced their views on sustainability.”
This is in line with a 2018 University of Technology Sydney study, which revealed that well-liked companies can get up to a 9% price premium for their products.
So, in a discussion about the long-term strategy and survival of companies, we must evaluate our personal and organisational values, as well as the key business fundamentals. For values usually decide the long-term growth that outlasts all else. Those who study a VIT MBA have many opportunities to learn how to do that.