The attitudes towards business culture in the United States are changing. Prospective employees, customers, business partners, and investors are not just asking how a firm is increasing its operating margin, but also questions such as: How are you promoting diversity in your organization? What are your firm’s sustainability objectives? How do you resolve issues of pay and leadership inequity? Where does the business stand on key social issues? How do businesses show employees they are valued? As we rethink the relationship that a firm has with society, it is no longer acceptable to have profit as the sole reason for a business to operate. In order to attract top talent and investment, companies must be able to demonstrate a commitment to meet Environmental, Social, and Governance goals.
Much has been written about “The Great Resignation.” The pandemic has caused millions to reconsider their relationship with their jobs. According to the US Department of Labor, 11.5 million Americans quit their jobs between April and June 2021. Long commutes, unreasonable hours, and lack of organizational support are no longer things that workers find acceptable. Many who lost their jobs during the pandemic realized they were missing out on time spent with family, pursuing hobbies and interests, and recovering from the burnout and stress they felt at their jobs. 74% of respondents in a recent survey stated time spent at home caused them to reevaluate their current work situation. As they learned to make do with reduced income, they found they were leading more fulfilling and enjoyable lives. Millennials and Gen Z in particular, who as a whole have entered the workforce at a time with reduced economic prospects and have greater engagement with social issues than previous generations, are defining success more in terms of overall life satisfaction than financial success.
Investors too are shifting their focus. The growth in ESG and B-Corp funds, doubling in new money invested in 2020 and now accounting for a quarter of all money that flowed into US stock and mutual funds last year, shows that profit is not the only consideration for where they invest their capital. They want to know that the business they support are doing their part to support are developing sustainable practices, not only to support the long-term financial health of the organization but to improve the world in which we live. Climate change, social inclusion and diversity, and economic justice and equity are issues that affect all of our daily lives. Companies share in the responsibility to effect change on these topics and investors are showing increased support for those who are responsible citizens.
Employees and investors now prioritize putting their efforts into organizations that they can be proud of. Companies are responding by investing a lot in initiatives to transform their culture, values, or DEI practices to meet these new demands. However, a 2020 MIT Sloan study found very little correlation between an organization’s stated core values and employee perceptions of how prevalent those values are. Businesses are skilled at building objectives regarding tangible goals like growth or revenue targets. The challenge is how do you turn abstract concepts like social responsibility into actionable processes?
- Make it real. Almost every company talks about integrity, diversity, or excellence as traits they value, to the point that it can seem like empty corporate platitudes. For your employees and investors to understand what these values represent to the firm, you need to create a meaningful definition. Instead of saying “we are an innovative company,” say “we encourage the development of new ideas by holding cross-functional planning meetings and rewarding top contributors.” You also need to develop KPIs that will provide targets for employees and insight into how those goals are being met.
- Make it relevant. Without guidance on how these initiatives tie back to job functions, it becomes difficult for the business to integrate these values into day-to-day tasks. For example, if you set transparency as a value, then standards need to be set and instructions given to managers on how they keep employees informed through decision-making processes. Additionally, seeking feedback from employees on steps they can take to embody the firm’s culture will lead to a diverse set of ideas and improved buy-in.
- Make it rewarding. One of the great truths of organizational design is you get the behavior you incentivize. A company can say they value integrity, but if bonuses can be gamed by padding sales numbers and creative accounting then employees will act dishonestly. The culture and values of your firm need to have significance in performance reviews, bonuses, perks, hiring, and promotion criteria. If your business is unwilling to show these ideas have real value to the firm, how can you expect employees will?
It’s time to move “we care” from good intentions to measurable outcomes. Make sure your organization is leading the way.
Meritarc enables your business to realize the full value your people can create. We are a human capital software company and provider of advisory services, specializing in financial services, fintech, and consulting firms. Our job architecture, performance management, and reward tools anchor business strategy in all people processes. Visit our website to learn more.