COVID-19 and the baby boom of social enterprise

Photo: Austin Chan on Unsplash
Photo: Austin Chan on Unsplash

"Now is a time for reflection. Who do we want to be? What kinds of businesses do we want in our lives?"

Last month, I wrote that your company’s response to the coronavirus might redefine your brand. We know from experience that nothing defines a company, its culture and its brand more than its response to a crisis.

For corporations, crisis response has gotten a lot more complicated as information has become democratized. With internal and external social media tools, today, sensitive and detailed information a company would prefer to keep isolated to internal, "need to know individuals," routinely become known to larger audiences. This can be deeply revealing of the stuff of which a company is made. 

This transparency, plus consumers’ and workers’ heightened expectations that companies "do good" have helped usher the rise of the "social enterprise." This is a business that has pro-social objectives integral to its purpose. Rather than seeking to maximize profits and shareholder value, as has been the unbridled number one priority for many companies, a social enterprise seeks to optimize or balance profits with societal and environmental benefits.

It has been argued that corporate focus on driving investor value above everything else has dimmed the American dream for average workers: earning enough to buy a home, to educate and lift their children above their own station, and to save for a comfortable retirement. 

The social enterprise seeks to take better care for workers, as well as suppliers and the communities in which they operate. This goes well beyond corporate social responsibility -- a "do-no-harm" or "leave a small footprint" position – to putting positive social purpose at the core of the business. It is also not the same thing as brands using marketing and PR to weigh in on social issues in the public zeitgeist, although a social enterprise is arguably best placed to do so. 

Deloitte has studied the social enterprise over several years. In their 2019 Global Human Capital Trends report, they highlighted CEO survey results that found "impact on society, including income inequality, diversity, and the environment" reported as the CEOs’ most important success measure in 2019. CEO awareness is a good first step, but as Deloitte summarized… companies with the ambition to become a social enterprise must embrace broad reinvention.

There are encouraging signs. Last August, members of The Business Roundtable, an association of CEOs from some of America’s leading companies whose focus is to promote a thriving U.S. economy and expanded opportunity for all Americans, announced a redefinition of corporate purpose to benefit all stakeholders: customers, employees, suppliers, communities and shareholders. Signed by 181 CEOs, their statement affirms, "Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country."

Currently, the COVID-19 crisis is testing all companies’ commitment to social purpose, and the stakes are high. Fleishman-Hillard published findings from a new six-country consumer survey (US, UK, China, Germany, Italy & South Korea). Eighty-nine percent of consumers said they expect employers to be generous and creative in mitigating the impact of the pandemic on their workers. 

Perhaps the massive disruption caused by the pandemic and the attention to how companies are responding will see more rethink their purpose. And for startups, embracing the ethos of the social enterprise early is a business opportunity. This could be one silver lining to all of this.    

However, companies are facing incredibly difficult decisions -- right now -- and without social purpose already at their foundation, some leaders may find themselves without a much-needed North Star. 

As described in The Unfinished Leader (Dotlick, Cairo & Cowan), even in the routine business context, leaders face decision-making paradoxes; for example, weighing individual business unit goals and personal success against the needs of peers and the whole company. 

In the pandemic, paradoxes might be... Should we keep the flow of products and services to customers going (especially vital services) or should we maximize our employees’ safety by telling them to stay home? And perhaps… should we keep focus on long-term financial solvency so we will still be able to serve our customers and employ people after all of this, or should we continue to employ and pay as many people now for as long as we can? 

Leaders may feel overwhelmed facing such decisions without one correct answer. The Unfinished Leader’s authors say – and this is important -- that leading through complexity requires giving up the illusion of control, consistency and closure. But for some leaders, the awareness that they no longer have total control isn’t there. They try to continue with closed communications practices aimed at keeping control. This is true in government as well where strict communications protocols seem to be fracturing in today’s transparent world. 

Consider the U.S. Navy’s handling of Brett Crozier, Captain of the U.S. Warship Theodore Roosevelt. Facing the spread of the coronavirus among 4000 souls under his command, he pleaded for help in a letter distributed outside his chain of command. The letter became public, prompting acting Secretary of the Navy, Thomas Moldy, to fire Crozier and publicly chastise him for being too naïve or too stupid to command a vessel of the Roosevelt’s stature. After public outcry, Moldy apologized and tendered his own resignation; and more recently, the Navy’s top brass have recommended Crozier’s reinstatement.   

Telecom provider, Spectrum (Charter), found its pandemic working policies the subject of an investigation by New York’s Attorney General as reported in The New York Times. Providing phone, internet and television to 29 million customers, Spectrum is inarguably an essential service provider. What’s at question though is the company’s requirement that workers continue reporting to their offices, even those delivering services by phone. After one of their engineers sent a far-reaching internal email asking why, according to the Times, he found himself questioned by higher-ups, offering a resignation and then having that offer accepted.    

Of course, there are also scores of organizations navigating the current challenges with remarkable empathy. Shake Shack’s CEO, Randy Garutti, decided his company would give back their Paycheck Protection Plan (PPP) loan so that other companies, perhaps more vulnerable and shut out when The Cares Act ran out of money, might have a chance at some help. Other companies capable of doing so have since joined in returning their loans. And perhaps inspired by Simon Sinek’s famous book, Leaders Eat Last, quite a few CEOs have announced that they will forego their salaries in total, this among a first line of cost-saving defense measures.   

We’re hungry for this kind of leadership.

New York’s Governor, Andrew Cuomo, gives a daily update on the City’s progress slowing the contagion, how the medical community is coping, business issues and more. His unwavering honesty, authentic empathy and consistent optimism are a blueprint for leadership in the social enterprise.  

On April 24th, Governor Cuomo shared an anecdote about his paternal grandmother, whom he described as a beautiful but rough-hewn woman after tough experiences in The Great Depression. He recalled that when he would say to her, "Oh, I’ve met a nice girl or a nice new friend," she would say, "Nice? What do you know about nice? It’s easy to be nice when everything IS nice. You only find out if someone is nice when things are hard." Agreeing with her, the Governor said that some people will be selfish, crumble and disappoint in a crisis. But others, people you may not know, or people from whom you expect nothing, will pleasantly surprise you. He said a crisis is like a pressure cooker and true colors explode. 

This is true of corporations too for their true colors are only as vibrant as their leaders and people. 

Now is a time for reflection. Who do we want to be? What kinds of businesses do we want in our lives? 

Some have questioned whether the global social distancing lockdown will result in a new baby boom. I hope… and believe there will be a boom in social enterprise.

David Grabert, an industry veteran, is the former global head of marketing and communications at GroupM.

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