Entries in values (10)


Impact investment and a measuring the higher purpose

An upcoming conference on impact investing at the Vatican highlights just one aspect of the growing interest in the intersection between financial capital performance and human, social and environmental performance, according to a recent article in the Financial Times.

Impact investing has been gaining traction in mainstream wealth management circles, generating both funding and attention to the issue of how to measure the social impact -- as well as the financial returns -- of a given investment. Exactly how much capital is invested in this manner is a point of some discussion: the Global Impact Investing Network (GIIN) has identified about $75 billion in total, while BlackRock -- one of the world's largest investment firms -- states that it alone manages $200 billion in impact investments. Still, there is clearly momentum behind the idea of doing well by doing good in the capital markets.

The requirement to measure social impact is what differentiates impact investing from other types of investment activity, such as socially responsible investing (SRI), or environmental, social and governance (ESG) investing, which apply various levels of screening up front to weed out certain industries or invest in companies that exhibit certain characteristics.

As expected, there is an active debate about what the right metrics for impact investments should be, and how they should be calculated. These are the same questions we addressed in developing the economics of mutuality, and we are very interested in the evolution of the answers.

-- Clara Shen


Corporate longevity

If corporate success can be defined, at least in part, by longevity then it is sensible to look for common elements among organizations that have survived and thrived for the longest period of time. The Financial Times has been doing just that, and I enjoyed this piece on corporate values.

One interesting finding was that strong corporate values appeared to be essential to corporate longevity; essential but not sufficient on their own.

Probing further, one theme that emerged was that sensitivity and agility--an ability to cope with change--is an essential skill. Companies are communities of people, and Gerald Storch, chief executive of Hudson’s Bay Company, noted that adaptability meant paying attention not only to customers, but to employees too. “Listen to your people because they know what is going on. They know what is right and what is wrong, what will work and what will not work.”

Tolerance is also called out as an essential trait; companies that survive over the long term are tolerant of elements within the business exploring around the far edges of the current business. They are well positioned to take advantage of innovations and new opportunities when the competitive, regulatory, or technological landscape shifts.

-- Clara Shen


Amazon and corporate culture

This week we've watched with interest the attention and debate generated by the New York Times story about Amazon and it's workplace environment that appeared on the front page of its Sunday edition.

The original report cast the retailer as creating an intentionally "bruising" and "thrilling" environment that was an experiment in how far white-collar workers could be pushed. Amazon's founder responded to the NYT piece by saying it didn't describe the Amazon he knows. And, subsequent stories have emerged suggesting that elements of the high-stakes corporate environment can be found in other employers--even some that have recently announced new, kinder policies towards employees.

The issue has clearly struck a chord with a large audience. The volume of the ensuing discussion speaks to the strength of corporate cultures and the importance of how values, assumptions and  expectations regarding ways of working are communicated to employees.

-- Bojan Angelov


SC Johnson case -- a test of values

An article in the current edition of Harvard Business Review captures the dynamics of managing a privately owned business with strong, long-held values and the tough decisions these companies are faced with on many levels.
In it, the CEO of SC Johnson presents a case study of sorts based on the company's Saran Wrap product. Framed in terms of "revenue vs. goodwill," the piece talked about the pressures he faced when deciding whether to replace the existing, successful product with a reformulated one that eliminated a questionable chemical but had inferior performance.
The goodwill of people is the only enduring thing in any business. The rest is shadow"

Ultimately, the company went with the reformulated product. As a privately held venture it did not face a shareholder backlash, but it was not an easy decision by any means. Inside the company there were vocal proponents of sticking with the existing formula beforehand, and afterwards the brand's financial performance did suffer as its relative market share dropped.

CEO Fisk Johnson maintains it was the right decision, based on the longstanding values of the company that put trustworthiness above all else. "Back in 1927 my great-grandfather said something that has been a guiding principle for me throughout my career: 'The goodwill of people is the only enduring thing in any business. The rest is shadow.'”
Across the corporate world we see a growing number of companies making commitments to higher values -- though we also see market pressures pushing managers arguably in an opposite direction. This is a tension we will see arise more often, and in more high-stakes decisions than before.
Key questions from examples like the Saran Wrap case include:
  1. When core values conflict with financial performance, what is the deciding factor?
  2. And what are the time horizons that will be used to make the decision -- will the calculation look at the long-term or the immediate impact?
-- Segundo Saenz & Bojan Angelov

Container Store -- ongoing case study of "conscious capitalism"?

Kip Tindell, the CEO of the Container Store, is featured in a Bloomberg Business article that looks at the tensions publicly-held businesses face between principles based on some form of mutuality and demands made by investors.

The Container Store's was launched in 1978, and was privately held (in partnership with a PE firm) until late 2013. It has operated from the beginning with a conscious capitalism business model that is summed up this way:

  1. Pay employees well and treat them with respect
  2. Consider suppliers and customers as family
  3. Have fun

However, by 2013 Tindell was was looking for ways to fund expansion to smaller markets, and to increase employee stock ownership options. He decided to take the company public.

In the lead up to the company's IPO, Tindell told his executives that he hoped to get along well with shareholders, and that he'd prefer long-term investors over short-term ones.  But on a public exchange, you can't pick who buys your shares.

If you retrieve your lure too fast you’ll never catch any fish. It’s stunning how slow you have to go. If you think you’re fishing slowly enough, fish half again slower, and you’ll catch many more.”

Since the IPO, Tindell has taken heat for not being aggressive enough on costs -- including employee salaries -- and not moving fast enough to shore up profit margins. He is standing on his principles for now, and hoping his shareholders will see the value in the long game.

Image source: Bloomberg Business

-- Clara Shen