What is that stimulating common goal that gets your employees out of bed every day, excited to play their part?
In a time of crisis, it can be difficult to think beyond the next hour, the next day, or the following week. The global COVID-19 pandemic has been difficult for all of us as we grapple with our duty of care to our employees, our communities, to each other and to ourselves.
The unprecedented disruption created by this crisis must be seen first and foremost in humanitarian terms, linked to the very real personal toll of this disease – serious illness and lives lost, isolation and fear, increased unemployment and economic precariousness.
The main question right now should be: how could we each play our part in ending this pandemic? But it is also a moment of reflection on the future. Who do we want to be when we come out of the worst? What do we want our organizations to stand up for? These are questions of strategy, of what it means to win.
How does your organization define victory? What is that stimulating common goal that gets your employees out of bed every day, excited to play their part? If your organization is like most of the people I have worked with, you might have a hard time answering this question. Despite all the time and resources spent on strategy work each year, few organizations have a broadly understood definition of gain that goes beyond making money for shareholders.
Fifty years ago, in “Corporate Social Responsibility Is Raising Profits,” economist Milton Friedman argued that the purpose of a business is to serve its owners. The role of the leader, he writes, is “to conduct business in accordance with their [owners’] desires, which will generally be to earn as much money as possible while complying with their basic rules of society. This notion, which is the basis of the doctrine of maximizing shareholder value, is now ubiquitous. But it is showing considerable signs of wear and tear as we increasingly realize the negative consequences of putting profits before people.
Prioritizing only short-term results for shareholders does not add much to our work; it hinders innovation; it reduces our commercial aptitude; and that makes real strategy work much, much more difficult. Meaning comes from creating real value in the world, which means we have to think globally in terms of who we earn with (and for). Innovation requires a long-term perspective, so we have to think about winning beyond this quarter or even this year. Business aptitude (the financial and strategic resilience of a company over time) depends on listening to things shareholders may not see. To ensure our viability, we must seek out signals that indicate what matters to customers, employees and companies. The strategy is to build a business that can win both now and in the future, so we need to be more holistic in our approach to making choices.
Whether it’s time to exceed shareholder value. How could we define victory in a more useful way, which stimulates rather than stops innovation? How could we define aspirations that do not suggest a win-lose framework? How could we instead seek to create value for customers, employees and investors?
Find the right language. In the process of strategizing for kyu, the collective of organizations that includes IDEO and SYPartners, some executives rejected the notion of “winning” entirely, shrinking from a word that seemed to relate to a mindset of shortage. If we win, they asked, who loses?
Tim Brown and Susan Schuman, the kyu vice presidents who co-led the strategy discussions, have given serious thought to how to meet this challenge. As Brown notes, they came to see that “we are really creating a community at kyu, a collective that aims to unleash creativity and help people thrive.” He continues: “What we have achieved is that communities don’t win or lose, they thrive or falter. The kyu strategy focuses on what it would mean to create a community that can truly thrive over time. Thriving may not be the word that resonates in your organization, but language matters. To redefine victory to be more inclusive, work with your team to find a mental model of victory that works for you, then develop shared definitions of the models you choose.
Shift the timeline. Another way to support current and unsustainable definitions of victory is to publicly shift the time horizon so that sustainability, both economic and ecological, can be made part of our aspirations. Unless we look further, we will continue to plunder the future to finance the present and degrade the planet to generate profit. For inspiration on what’s possible, take a look at Paul Polman, former CEO of Unilever.
In an interview for my book Creating Big Choices, Polman explained how he decided to change the time horizon at Unilever: “One of the things I needed to do was take the business to a longer plan. term, ”he said. “We had become victims of chasing our own tail, of reducing our internal spending on capital, R&D or IT to meet market expectations. We were growing our brand spend on a quarterly basis and not doing the right things … We were responding to shorter term shareholders.
Polman decreed that the company would stop producing quarterly reports and stop giving advice. He embarked on a vast environmental sustainability effort and reinvested in R&D, talent development and brand building.
Polman believed shareholders whose interests aligned with Unilever’s (i.e. long-term profitability and environmental sustainability) would eventually buy into his plan. Taking a long-term gain perspective not only allows Unilever to invest in innovation for its customers and in the development of its people, but also allows leadership to focus on the fundamentals of the business rather than managing. short-term expectations. As a result, it also created a lot of shareholder value. During the decade that Polman led Unilever, his stock price rose 170%, creating more shareholder value than most FTSE 100 companies. This is a win-win solution, and she was fueled by a desire to present herself differently in the world.
Define your goal. A third way to redefine winning productively is to relate our aspirations to a larger goal. Think of the goal as the human “why” that explains why a business exists. The best goal statements are very human – they relate the work of the organization to real people, real needs, and real problems to solve. By setting a meaningful goal, companies can demonstrate to employees and customers what they stand for and why. The objective can then define the context of the strategy; we can define what it means to win in the service of our overall goal.
One company that demonstrates the power of linking goal to strategy is Orbia. Until 2019, Orbia was called Mexichem and was mainly known as a chemical company. Last year, with a new brand, Orbia unveiled a new goal: to advance life in the world, tackling some of humanity’s greatest common challenges, such as food security, scarcity of water and livable cities.
If it had continued to define itself as a chemical company, Mexichem could have followed the path of almost inevitable commodification. Instead, CEO Daniel Martinez-Valle and Orbia’s management team worked with IDEO to set a higher bar with a bold new goal. Now, the team is working to link its strategic choices, resource allocations, and employee incentives to this larger goal. This requires reorganizing the business structure into five business groups, each aimed at addressing a unique global challenge, defining meaningful sustainability goals for each business, and investing in innovation in a meaningful way. .
That’s really the power of the goal: it can align the organization, motivate employees, and promise customers something they can believe in. No wonder goal-driven companies tend to have higher employee engagement, happier customers, and better overall performance. They are winning on several dimensions.
Winning is not easy. It’s tempting to define payout narrowly, to make it easier: winning means increasing the stock price this quarter. But as the last few months have shown, a definition of profit by shareholders is not only hollow, it can leave organizations with nothing to fall back on in times of crisis. We need a much richer, more ambitious understanding of what it can really mean to win.
To get there, ask how we might define a winning aspiration, using language that suits our organization, pushing back the time horizon, relating strategic goals to a larger sense of purpose, and empowering ourselves to dream big.
Jennifer Riel (Rotman MBA ’06) is IDEO’s Global Strategy Director and co-author with former Rotman School dean Roger Martin of Creating Great Choices: A Leader Guide to Integrative Thinking (Harvard Business Review Publishing, 2017). Prior to joining IDEO, she spent 13 years at the Rotman School of Management, teaching undergraduates, MBAs, and executives how to think creatively about their toughest challenges. This article originally appeared in a recent issue of Rotman Management, the magazine of the Rotman School of Management at the University of Toronto. www.rotman.utoronto.ca/connect/rotman-mag.
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[This article has been reprinted, with permission, from Rotman Management, the magazine of the University of Toronto’s Rotman School of Management]