The future CEO’s answer to ‘profit or purpose?'
What would Gen Ys focus on if they were the CEOs of their organisations? Adam Kingl does the research.
What would Gen Ys focus on if they were the CEOs of their organisations? Adam Kingl does the research.
Earlier this year, I revealed the full details of a five-year survey of Generation Ys. These respondents are more likely to be in the C-suite of the future by virtue of their companies’ nominating them to attend a London Business School Executive Education development programme, from which we derived our survey population. We asked a series of questions to understand if there are dominant paradigms toward work and leadership, which may reveal for us a preview of the future CEO’s priorities.
In previous blogs, I discussed how this sample of Gen Y planned to stay no longer than five years in any job, and how work-life balance and organisational culture were more important than traditional benefit packages in choosing their employer. We learned that 90% plan to stay no longer than five years with their company and over a third no longer than 24 months.
Finally, we turned to what these Gen Ys would focus on if they were the CEOs of their organisations. We gave them five general options and asked participants to select only their most preferred answer. The options speak to five themes: minding one’s core business, going global, thinking entrepreneurially, aligning with purpose, or maximising return to shareholders. We anticipated a spread of alignment across these options with perhaps a favourite emerging. What actually occurred in the results was far more surprising.
The results, reported as the percent of all respondents who selected each option, are as follows:
Would you focus on:
- 11.5% How business is trading
- 11.5% The global impact of the business
- 33% Retaining an entrepreneur’s point of view: ‘How’s my baby doing today?’
- 43% Renewing personal mission: ‘How do I make my organisation and world a fundamentally better place?’
- 1% The financial worth of the business
On the two occasions I have shared these responses with an audience, I always follow up by asking if the last response, the 1%, scares them. It has been about 50-50 ‘scared, not scared’. I would posit that if 50% of a population is scared about a topic, then it’s worthy of attention! Either way, 1% is significant in its insignificance – that it bears so little import to this population. This answer flies in the face of conventional wisdom that the purpose of business is to maximise profit and shareholder returns.
Does this mean that the Gen Y CEO does not want to make a profit? Absolutely not. Business has to survive and thrive.
Here’s the rub. Most businesses (banking is perhaps a notable exception) started because of a strong sense of a purpose: introducing an exciting product to the world, serving a previously undiscovered market need, bettering a community, creating employment opportunities. But then financial analysts’ opinions grew in importance to investors, with their use of various ratios that are useful shortcuts in assessing company health. However, we must remember that these ratios were created as shortcuts useful for financial analysis as a snapshot today; they do not assess if the business is closer or farther from achieving it purpose, closer or farther from achieving long-term and ‘moon shot’ objectives.
Furthermore, chasing ratio optimisation is a short-term game. Before one knows it, the purpose of the business can tacitly, implicitly be to please the analysts, and making decisions toward long-term objectives takes a back seat. If the CEO or CFO starts adopting someone else’s KPIs, using these ratios as their primary KPIs, they risk creating drift from the mission of the organisation. Longer-term, this can make sustained success much harder over time.
Unilever has famously tried to break this dynamic by informing the investor community that it will no longer publish quarterly forecasts. This was entirely to allow CEO Paul Polman more freedom to make the longer-term a priority – environmental and social sustainability. Mr Polman said in 2012, ‘We’re not going into the three-month rat-races. We’re not working for our shareholders. We’re working for the consumer, we are focused and the shareholder gets rewarded.’ This is a refreshing perspective, inverted from the traditional ‘shareholder focus’ view – that the company’s outputs, its efforts, are consumer focused, and shareholder rewards are some of the outcomes of that focus.
Returning to the Gen Y survey, and looking at the last two answers together – 43% want to focus on mission and 1% on financial worth – perhaps indicate that more CEOs of the future will behave as Polman has. But will the investor community tolerate this? There will be inevitable tensions, but remember that with every week more Gen Ys become investors and asset managers themselves, and they may be seeking companies under management that share their ethos. After all, in the US alone there are over 90 million Gen Ys with an aggregate net worth of more than $2 trillion; by 2018 that is expected to grow to £7 trillion.
A good example of the purpose-driven, commercially savvy company is Facebook. One need only read Mark Zuckerberg’s (arguably the face of the new Gen Y CEO) letter to potential investors in Facebook’s $5B IPO: ‘Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected. We think it’s important that everyone who invests in Facebook understands what this mission means to us, how we make decisions and why we do the things we do. I will try to outline our approach in this letter.’ Not only was Facebook’s funding goal met, but a shareholder investing only two years ago would be earning approximately a 100% compound annual growth rate on their investment today.
Perhaps our ultimate question should be: ‘Are “mission” and “financial return” fundamentally in opposition to each other?’ Recent research indicates this is not necessarily so, and the two forces may even serve each other. A huge amount of dialogue has attempted to answer this question both in media and in conferences. The opinions are typically more definitive then one may guess and often resemble the sentiment: ‘The most successful companies, both in profitability and longevity, are the ones who recognize the absolute necessity of profits as well as the equally high necessity of having a purpose beyond shareholders’ wealth.’
The Gen Y CEO’s paradigm of management and work gives me hope for a more sustainable future. To say that we must either ‘work to live’ or ‘live to work’ is a false dichotomy. If organisational purpose is strong, informs every decision, and is tangible in outputs and outcomes, then work-life could perhaps more resemble the life that is worth living; surely that is a work-life worth working for.
1. ‘Corporate Sustainability: Unilever CEO Polman on ending the “three-month rat race”’. Deborah Zabarenko. Reuters Blog, 26 October 2012.
2. 'Wealthfront Raises Another $64M as It Pushes to Manage Gen Y Assets’, Silicon Valley Business Journal, 28 October 2014.
3. ‘Facebook’s Chief Executive’s Letter to Potential Investors’, BBC News – Technology, 2 February 2012.
4. ‘It’s Time to Balance Profits and Purpose’, David Williams & Mary Scott, Harvard Business Review, HBR Blog Network, 17 September 2012
