This is the first in a series of excerpts from Engaging Outraged Stakeholders: A How-To Guide for Uniting the Left, Right, Capitalists and Activists (Affinity Press, 2013), the new book from Future 500, co-written by CEO Bill Shireman, COO Erik Wohlgemuth and VP of Stakeholder Engagement Danna Pfahl. We begin with the first of two posts that make up Chapter Two: The Power of Engagement.
Beneﬁts to Business, Stakeholders, and the World
Engagement isn’t easy. In fact, sometimes the only thing harder is not engaging. So before we dive into the “how”s of engagement, let’s skip brieﬂy to the happy ending: How do businesses beneﬁt from engagement? Why would busy executives want to engage with activists who want to change the way they run their companies?
First, because it’s good for business, in at least six ways:
- Engagement drives innovation.
- Engagement improves employee recruitment and retention.
- Engagement helps the company avoid or beneﬁt from regulation.
- Engagement keeps the company ahead of market changes.
- Engagement reduces the intensity of conﬂicts with activists.
- Engagement occasionally generates a halo effect that builds corporate reputation.
Second, and more important than the traditional bottom-line beneﬁts, is the power of engagement to advance the deeper purpose of the corporation — the purpose that proﬁt is meant to serve.
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Why engage even one of these outraged activists demanding that you right global wrongs that you hardly inﬂuence, much less control? Above all, engage because it is in your corporate self-interest. If you are a company with a brand or reputation to protect — or if you sell products or services to any such company — then you beneﬁt from engagement in at least six ways:
First, innovation and competitive advantage. When Kim Jeffery was a sales executive at Pepsi-Cola, he had to work with retail customers pressured by activists to stop selling so many sugary and sweetened beverages. Kim was a health and ﬁtness nut himself, so he understood the concern. He realized that, very often, he drank bottled beverages simply because they were more easily accessible than water. From that insight, Kim left Pepsi and joined Perrier, a French bottler of specialty water that was planting roots in the U.S. Kim sold Perrier in large bottles, but he also convinced the company to market the ﬁrst single-service bottled water. He had hit on something. The market exploded. Soon, Perrier in the U.S. was bought by Nestlé, and today, Kim serves as chairman of the world’s largest bottled water company, and the third largest non-alcoholic beverage company in the U.S., behind Coca-Cola and Pepsi. In the process, Kim and his company became heroes to public health advocates. On the other hand, within a few years they were tagged as villains by environmentalists, for creating so much plastic bottle waste. But that’s another story — one Future 500 is part of. More on that later.
Second, high-calibre employee recruitment and retention. Every major business school in the U.S. has launched “sustainable MBA” programs and specialties — not just to be responsible but to attract the best and brightest students. But commitment to sustainability is no longer a priority only of the young. We can tell you from personal experience: Top executives and seasoned managers are also highly motivated to have a positive impact on the world. Some may fear sustainability issues as a diversion at ﬁrst. But once they gain a comfort level, they ﬁnd them extraordinarily motivating, often a highlight of their careers. According to the Massachusetts Business Roundtable, corporate social responsibility (CSR) activities “comprise an increasingly important way to attract and retain good employees from all generations. Contrary to early research that suggested CSR was more important to young professionals, researchers are now ﬁnding that CSR is valued by employees of all experience levels and generations.
Part of the reason is that, according to an article by C.B. Bhattacharya, Sankar Sen and Daniel Korschen, in the MIT Sloan Management Review (Winter 2008), “CSR initiatives reveal the values of a company and thus can be part of the ‘employee value proposition’ that recent studies indicate is the lens through which managers must view talent management today. CSR also humanizes the company in ways that other facets of the job cannot.” In the Global Workforce Study, which surveyed nearly 90,000 employees in 18 countries in July 2008, Towers Perrin found that CSR “is in fact linked to how well employees perform.” In other words, “CSR extends to the bottom line.” The study found that CSR is the third most important driver of employee engagement overall. In addition, “for companies in the U.S., an organization’s stature in the community is the second most important driver of employee engagement. This is important because higher employee engagement levels are highly correlated with better business performances as measured by revenue, earnings and other key business metrics.” That is one reason corporate more than 60 companies publicly signed a brief calling on the U.S. Supreme Court to support marriage equality, when California’s Proposition 8 ban on gay marriage comes before the court.
According to Roger Parloff of Fortune magazine, Apple, Facebook, Ofﬁce Depot, Verizon and the other companies believe “Proposition 8 impedes businesses from achieving the market’s ideal of efﬁcient operations — particularly in recruiting, hiring, and retaining talented people who are in the best position to operate at their highest capacity.” Religious conservative groups like Family Research Council criticized the companies for supporting gay marriage. But business engagement has helped moderates on both sides ﬁnd common ground. Companies have a capacity lacking in more ideological groups. They can play a decisive role in validating and integrating the concerns of both sides, championing family values while recognizing different family structures. They may not satisfy all the hardened fundamentalists, but their efforts will be respected by the vast majority of their customers, employees and stakeholders.
Next: Four more reasons to engage activist stakeholders …