Press Releases
Recovery will rely on revival of “business purpose and fairness”, claims Will Hutton in new essay
Thursday, 10 December 2009
Christian Zarro
The financial crisis and recession not only exposed failures and excess in the financial sector, but diverted attention from similar weaknesses that existed across British businesses, claims Will Hutton, executive vice chair at The Work Foundation in a new essay. Outlining these weaknesses, he captures the challenges that UK businesses now face, spelling out what needs to be done to address them. He calls on the unions to recognise 21st century workplace realities and specifies how the government could put innovation at the heart of its financial, business and industrial policies.
In The Landscape of Tough Times, Hutton welcomes growing recognition that the credit boom and asset price bubble allowed many companies to dodge fundamental issues about how to generate sustainable wealth. He sees the period of Enron’s collapse in 2001 to Lehman’s bankruptcy in September 2008 as the high watermark for what a growing number of business thinkers, leaders and commentators now regard as an era of profoundly misguided corporate leadership and disintegration of important business values. As the credit crunch and catastrophic recession have finally forced the issues out into the open, he argues that it was not only the banks that over-prioritised shareholder maximisation at the cost of other important business goals such as operating with integrity and ensuring a sustainable business model.
In relentlessly pursuing the overriding business target of boosting short-term profits by whatever means possible, he claims that “Company boards were part bullied, part in thrall and part anxious to join the party by the demands, glamour and extravagant rewards offered by Big Finance.”
People engagement, innovation, cultivation of customers - all were compromised to reach the goal perceived as the most important: short-term financial success. “Managers became asset sweaters and target achievers instead of business builders and people engagers,” he asserts. Yet abundant evidence demonstrates that profits derive from the capacity to maintain the promise of the quality and integrity of a business offer, along with a commitment to continuously upgrade and innovate over time.
Hutton flags up a paradox: “Once the capacity is inverted so that a business’ purpose is purely profit, this undermines a company’s capabilities. It turns people into profit automata; resulting in all processes being valued only to the extent they turn a profit. This undermines not only companies, but the very idea of capitalism itself.”
Citing the knowledge economy - however it is defined - as the key to growth, he also sees it as the best way to reduce unemployment and lower our carbon footprint. Hutton’s most effective route to a high performance workplace centres on reviving business purpose, committing to fair companies and engaging employees. Crucial conditions of success are fairness and clarity of business purpose: “If companies have a clear idea of who and what they are, then everything becomes easier - who to recruit; investment priorities and which markets to target. It allows companies to align their brand, business model and purpose.”
The Work Foundation 2005 report, Cracking the Performance Code demonstrated how firms that combine and integrate market responsiveness, shareholder value maximisation, innovation, employee engagement and stakeholder involvement around a clear business purpose significantly outperform those who do not. Hutton is convinced that the reason Rolls Royce, Sainsbury and Standard Chartered have fared better than expected in this recession is in part due to their reliance on a clear business purpose and maintaining fairness in outcomes and processes.
Ends
Notes to editors
Will Hutton is available for a limited number of interviews.
The Landscape of Tough Times is available at www.theworkfoundation.com
The Work Foundation is the leading independent authority on work and its future. It aims to improve the quality of working life and the effectiveness of organisations by equipping leaders, policymakers and opinion-formers with evidence, advice, new thinking and networks.
Media enquiries: Christian Zarro 020 7976 3584 czarro@theworkfoundation.com