My second post on Paul Polman’s (former Unilever CEO) and Andrew Winston’s great book, Net Positive, covers a random bunch of advice and ideas that they give on managing for stakeholders. How best to manage a firm with more than just the shareholders in mind?
Better Business Practice Can Lead To Better Opportunities
Many in the area of sustainability are keen to emphasize that there doesn’t need to be a conflict between doing good and doing well. Doing good for the world can help the shareholders. I don’t mean to imply there won’t ever be any conflict. There is no guarantee that doing good always means doing well. Instead, the point is more modest. That conflicts between doing good and doing well aren’t inevitable in a world where the pie can grow. We are not always (indeed I would say usually) playing zero-sum games, see here.
Polman found that leading a company known for acting with a range of stakeholders in mind created opportunities that other firms with less positive reputations did not have. This could be in the form of firms to acquire.
Unilever has also thrived in part by acquiring fast-growing, purpose-led businesses that would only sell to Unilever because of its track record.
Polman and Winston, 2022, page 43
Or employees to hire.
In fifty-two of the fifty-four countries where Unilever recruits from universities, it’s the employer of choice with the consumer goods sector.
Polman and Winston, 2022, page 128
Doing good can lead to doing well for the shareholders as people generally react better to those who are treating others well.
Managing For Stakeholders: The USLP
A key element of managing for stakeholders at Unilever was embedding a clear set of values throughout the organization. At Unilever, the chief marketing officer was given the task of embedding the USLP, (the Unilever Sustainable Living Plan). To be clear this wasn’t just a ‘marketing’ activity, which is a genuine concern that observers might have. Instead, the USLP was something designed to be central to all the firm’s actions.
The needs of a wide range of stakeholders were key to Polman’s ethos and central to the USLP. Indeed, he credits being seen to have a wider purpose with helping fight off a hostile takeover, which he thought would asset strip the firm. Partners who trusted Unilever were behind him when he needed them.
Treat Employees Better
I don’t understand why the US allows employees to be treated so badly. There are potential gains from flexible working arrangements but employees are people who need some sort of certainty that they will get paid next week. This isn’t just about being a good company, although that matters. Employers need to inspire some sort of commitment to get the best from their employees. Why would anyone be loyal to a firm that is one bad quarter away from mass redundancies?
Part of the problem may be expectations of managers.
…layoffs somehow became a sign to investors of good management
Polman and Winston, 2022, page 348
I especially don’t know why macho management is seen as anything but evidence of managerial incompetence. If a company needs to lay off chunks of their staff then the CEO looks pretty rubbish to my mind. If a firm ‘over-hired’ the CEO can’t plan for the future when they are hiring so why do they deserve to remain CEO? Unexpected crises might occur but, obviously, managing for stakeholders doesn’t involve firing loads of your employees and messing up their lives because a short-term plan didn’t come together.
Managing For Stakeholders In The Short -Term and Long-Term
The authors highlight the tension between the short- and long-term. Polman famously stopped quarterly reporting arguing such a focus on short-term results creates problems following through with long-term plans. The argument is that with quarterly reporting firms take action to make the short-term numbers work, but these actions hurt the long-term health of the company.
Slashing people, R&D, or brand spending just to give investors a sugar rush of higher margins today was a recipe for disaster later.
Polman and Winston, 2022, page 22
Do We Want Growth?
I find some of the discussions around growth strange. Too many people seem hostile to the idea of growth without clearly defining why it is a bad thing. Surely it depends on what is growing before we can have an opinion on whether growing is a good thing. As such I appreciated the call for more thoughtful discussions.
We need to question growth, but ask a more nuanced question about what kind of growth we’re pursuing. If your company can produce a circular or regentative product, then please grow.
Polman and Winston, 2022, page 338
For more on sustainable business especially marketing, see here.
Read: Paul Polman and Andrew Winston (2022), Net Positive: How Courageous Companies Thrive By Giving More Than They Take, Harvard Business Review Press