Lough­lin Hick­ey

is one of the found­ing Trustees of Blue­print for Bet­ter Busi­ness and is also a Senior Advis­er. Lough­lin was for­mer­ly Glob­al Head of Tax and mem­ber of the Glob­al Exec­u­tive Team at KPMG.

OPINION – Cor­po­rate report­ing and busi­ness pur­pose

Sustaining the performance potential

By Lough­lin Hick­ey

The efforts cur­rent­ly being made around the world to make cor­po­rate report­ing more com­pre­hen­sive and under­stand­able are to be applaud­ed, even if com­pre­hen­sive and under­stand­able could be seen as com­pet­ing objec­tives. My objec­tive is not to cri­tique these efforts but to sug­gest that their effec­tive­ness and impact might be judged against a dif­fer­ent way of think­ing. I sug­gest that report­ing is about how an organ­i­sa­tion is per­form­ing against its promis­es. The cen­tral promise of an organ­i­sa­tion is its pur­pose – the why of its exis­tence – and an accom­pa­ny­ing promise is around how peo­ple are both impact­ed by, and invit­ed to con­tribute to, ful­fil­ment of that promise.

Liv­ing up to promis­es around pur­pose and peo­ple enhance per­for­mance. There are many stud­ies now avail­able to show that a pur­pose­ful com­pa­ny dri­ves supe­ri­or oper­a­tional per­for­mance and this evi­dence base is grow­ing. What I would like to explore is what might enable report­ing to be an active part of sus­tain­ing this per­for­mance poten­tial.

The pur­pose of busi­ness is … busi­ness?

A tra­di­tion­al mind­set about busi­ness views the pur­pose of a “for prof­it” ven­ture as being in ser­vice of max­imis­ing val­ue for those that have put finan­cial cap­i­tal at risk. Imag­ine for a minute if the tra­di­tion­al view about busi­ness and peo­ple was not as cor­rect as it is assumed to be? If there was an alter­na­tive view about the pur­pose of busi­ness and how peo­ple are moti­vat­ed could we re-look at the type of promis­es that a busi­ness was mak­ing and from that re-think the role of report­ing? This alter­na­tive mod­el is where pur­pose and peo­ple pre­vail. Of course that alter­na­tive mod­el should not be seen to be an infe­ri­or way to gen­er­ate val­ue.

Soci­ety tak­en as a whole has cho­sen to reg­u­late busi­ness behav­iour in rela­tion to all stake­hold­ers and not just share­hold­ers. Some refer to these con­straints on busi­ness behav­iour as being their “licence to oper­ate” and so it is clear that soci­ety has the right to reg­u­late the behav­iour of busi­ness. The risk with this licence to oper­ate approach alone is that it can rein­force the notion of busi­ness as a nexus of con­tracts and the licence to oper­ate is mere­ly a finan­cial trans­ac­tion to be nego­ti­at­ed and cost­ed into the busi­ness mod­el. If we are to move away from this “finan­cial­i­sa­tion” of busi­ness respon­si­bil­i­ties we need to look at the rela­tion­ship between busi­ness and soci­ety in a dif­fer­ent way.

Busi­ness in soci­ety

Sure­ly busi­ness is part of soci­ety and not apart from soci­ety and joined by con­tract. Its spe­cial sta­tus has been grant­ed by soci­ety and it is a rea­son­able posi­tion to take that that sta­tus has been grant­ed on the premise that busi­ness was meant to be a means to ben­e­fit soci­ety as a whole.

Evi­dence of a live debate about the role and expec­ta­tions of busi­ness is in the emer­gence of dis­cus­sion of alter­na­tives, such as The B Cor­po­ra­tion in a num­ber of coun­tries, and in the UK the pub­lic debate on the pur­pose of the cor­po­ra­tion, backed by pow­er­ful analy­sis. At the same time, a re-exam­i­na­tion of the human per­son based on the wis­dom tra­di­tions includ­ing phi­los­o­phy and faith and stud­ies of human behav­iour in fields as diverse as neu­ro­science, pos­i­tive psy­chol­o­gy and behav­iour­ial eco­nom­ics have been turned into reflec­tive but prac­ti­cal and action­able tools by inde­pen­dent actors such as Blue­print for Bet­ter Busi­ness (see infobox). So it is time­ly to explore an alter­na­tive that could re-shape our think­ing about what promis­es a com­pa­ny should be mak­ing about pur­pose and peo­ple and what to look for in asso­ci­at­ed report­ing.

An oper­at­ing mod­el guid­ed by pur­pose

The oper­at­ing mod­el is a map that starts with the pur­pose and the needs of soci­ety that the organ­i­sa­tion will help to address and the out­comes it seeks to pro­duce (both social and finan­cial). It then iden­ti­fies the major resources that it requires and how they are sourced, the key rela­tion­ships need­ed to col­lab­o­rate to trans­form those resources into valu­able goods and ser­vices, and the trans­for­ma­tion activ­i­ties that pro­duce the val­ue. Impor­tant­ly the trans­for­ma­tion activ­i­ties include the build­ing and sus­tain­ing of the key rela­tion­ships that are at the heart of the oper­at­ing mod­el. Report­ing on pur­pose, oper­at­ing mod­el and strength of rela­tion­ships is trans­paren­cy by design rather than by dis­clo­sure. Is this too fan­ci­ful? I would sug­gest that Unilever’s Sus­tain­able Liv­ing Plan and Syngenta’s Good Growth Plan could be looked at with this lens and mind­set.

An alter­na­tive view of the human per­son

Report­ing can play an active rather than a pas­sive role in sus­tain­ing per­for­mance if it becomes part of a dia­logue with the key rela­tion­ships iden­ti­fied in the oper­at­ing mod­el. This brings us from a mind­set shift around an alter­na­tive view of the role and nature of busi­ness into the sec­ond part of the mind­set shift, name­ly the view of the human per­son.   The share­hold­er val­ue max­imi­sa­tion mod­el of the world has an assump­tion about the human per­son being in pur­suit of max­i­mum per­son­al util­i­ty. And that assump­tion per­me­ates a lot of the think­ing about busi­ness and man­age­ment. But what is even more alarm­ing is that this think­ing with­in busi­ness alters and nor­malis­es cer­tain types of behav­iour.

A more real­is­tic view of the human per­son is that yes we are self-inter­est­ed, not least as a defence mech­a­nism, and that state is nur­tured when we feel in fear or dis­re­spect­ed, but self-inter­est is an incom­plete view. At the same time, as humans, we are seek­ing mean­ing in what we do, we want to be in rela­tion­ships and to help co-cre­ate some­thing beyond our­selves. In a busi­ness con­text it is pos­si­ble to think of soci­ety as the enti­ty beyond our­selves and beyond the busi­ness. Pur­pose enables each per­son to align them­selves to that busi­ness ven­ture and help it to pros­per by being a cus­tomer, a sup­pli­er, an employ­ee, a mem­ber of a local com­mu­ni­ty, a mem­ber of soci­ety or an investor. Imag­ine the impact on a busi­ness if all of the key rela­tion­ships were moti­vat­ed towards the suc­cess of the enter­prise. The inno­va­tion poten­tial of com­mit­ted sup­pli­ers, loy­al cus­tomers and moti­vat­ed employ­ees. The enhanced rela­tion­ships with cus­tomers when you recruit, devel­op and enthuse com­mit­ted employ­ees. The abil­i­ty to grow when com­mu­ni­ties wel­come your busi­ness and accept dis­rup­tion for a long-term ben­e­fit and seek the skills to cre­ate a sta­ble local work­force. The man­age­ment of risks when employ­ees call out behav­iour incon­sis­tent with the pur­pose and char­ac­ter of the organ­i­sa­tion they care about. The view of reg­u­la­tors and gov­ern­ments when they see lead­er­ship and the work­force unit­ed in a pur­pose to serve soci­ety and build­ing peo­ple of char­ac­ter and respon­si­ble deci­sion mak­ing. The view of investors who see a com­mit­ment to the long-term, the man­age­ment of risks, the excite­ment of inno­va­tion, respon­si­ble growth and fair allo­ca­tions of prof­it.

Promis­es around pur­pose and peo­ple dri­ve per­for­mance. Insight­ful report­ing as part of a dia­logue with peo­ple to describe how an oper­at­ing mod­el dri­ven by rela­tion­ships is per­form­ing con­tributes to sus­tain­ing that per­for­mance.

The arti­cle pub­lished here is writ­ten in Lough­lin Hickey’s per­son­al capac­i­ty and not in his offi­cial posi­tion.

About Blue­print for Bet­ter Busi­ness

Blue­print is a cat­a­lyst for change in busi­ness. It helps busi­ness­es realise their true long-term poten­tial: to serve soci­ety, respect peo­ple, redis­cov­er their pur­pose, and there­by earn a fair and sus­tain­able return for investors. The Blue­print move­ment is a rich net­work of peo­ple and organ­i­sa­tions that learn from each oth­er, and includes NGOs, investors, con­sul­tants, coach­es, think tanks and aca­d­e­mics as well as busi­ness. Blue­print has devel­oped a num­ber of tools that act as a prac­ti­cal guide to mak­ing this a real­i­ty.

Blue­print Trust is an inde­pen­dent UK char­i­ty. It is not fund­ed by busi­ness but by char­i­ta­ble foun­da­tions and indi­vid­u­als. Its work is not about com­pli­ance or reg­u­la­tion but about stim­u­lat­ing and ener­gis­ing a dif­fer­ent way of think­ing and behav­ing in busi­ness. www.blueprintforbusiness.org