A company's leadership is important in staking out a direction and a culture for the business. But as social values change and become more important to both employees and consumers, it's often from below, rather than above, that true change is driven.
An upcoming book by University of Virginia Darden School of Business faculty members James Rubin and Barie Carmichael, entitled "Reset: Business and Society in the New Social Landscape" (Columbia Business School Publishing, 2018), explores the changing nature of businesses' relationships with the social landscape, their employees and their customers.
"People talk a lot about an erosion of trust," Carmichael told Business News Daily. "This is not new, but what is new is a growing expectation of business's role in society on a global basis. People are shifting their attention from products and services to the companies behind those products and services."
Business often comes with what Carmichael terms "inherent negatives." Whether it's a high demand for natural resources – for example, the need for large amounts of water in soft drink production – or environmental hazards, such as a transportation company's high levels of emissions, the cost of doing business is always more than just dollars and cents.
It's how companies manage those inherent negatives and work to reduce their impact that determine whether or not consumers see them as progressive-minded or social pariahs, said Carmichael. That label can be the difference between failure and success.
"A whole new social ecosystem has been set up and … social ecosystems fuel things like regulations and boycotts and mischief," Carmichael said. "Boards are waking up to it and asking questions that they haven't before."
These are some statistics Carmichael and Rubin found in their research:
- 71 percent of people said their expectations for companies have increased.
- 68 percent said it's more important to know how companies operate than what they sell.
- 94 percent of those surveyed said companies have the ability to shape a better society.
- 87 percent said most companies exist to create value for multiple interests in society, rather than just profit.
- 75 percent said they converted their opinions of a company into action.
These beliefs and expectations have a huge impact on consumer behavior. People now "initiate conversations with friends and family, change purchase behaviors, and influence others whether to take or not take a job," Carmichael said.
That final piece affects the labor force rather than consumption, an increasingly painful point of reckoning for modern companies. As baby boomers begin retiring and exiting the workforce at a rate of 10,000 per day, the new generation of workers cannot hope to replace those numbers. That means stiffer competition for top talent, and Carmichael said workers are paying attention not just to professed core values, but to which companies put their money where their mouth is.
"It's not just customer need and product delivered anymore, but add a third circle of social needs," Carmichael said. "It's customer unmet need, a capability that addresses that need that produces profit, and one that also addresses a social need. We're resetting the sweet spot. Those are the companies that are going to do well."