3 imperatives for businesses in the age of coronavirus
Photo: Coronavirus Makers
The Covid-19 crisis is putting pressure on companies to embrace their broader responsibilities and become fairer and more conscientious. Can companies change their priorities to meet these expectations, or will they continue with business as usual?
Esade professor Oriol Iglesias and co-authors Nicholas Ind (Kristiania University College) and Stefan Markovic (Copenhagen Business School) believe that the coronavirus crisis is an opportunity for organisations to find greater purpose and fairness.
"By looking at how pre-Covid trends have accelerated during the crisis and how people and businesses are responding to constraint and opportunity, we foresee that companies will have to take on three interconnected imperatives in the future," write the authors in the California Management Review journal.
The researchers say the following three imperatives will be essential for companies adapting to the new normal:
- Develop a balanced stakeholder perspective.
- Define and deliver a clear purpose that enables agility.
- Encourage the participation of employees, partners, and citizens in co-creating the future.
1. Develop a balanced stakeholder perspective
The authors forecast the death of shareholder primacy. In the new normal, increasing profits and thinking about shareholders first and foremost will no longer be sufficient.
“Over the years, the limitations of shareholder primacy have been questioned and challenged in terms of ethics and effectiveness,” says Iglesias.
Critical voices have called for an alternative: a shift from shareholder primacy to a broader stakeholder perspective. "Companies can no longer sustain the pure focus on shareholders. They have a responsibility to meet the interconnected needs of all stakeholders," says Iglesias.
In the new normal, increasing profits and thinking about shareholders first and foremost will no longer be sufficient
The onset of Covid-19 and business uncertainty pushed companies to take different paths. While some companies reverted back to thinking about shareholders only, others adopted a broader stakeholder perspective. “Many companies recognised the need to ensure the safety and well-being of their employees and customers, and to contribute to society,” write the authors.
For example, during the Covid-19 outbreak, Danone announced in May 2020 its commitment to become the first listed Enterprise à Mission company in France. This new structure creates a legal obligation for Danone to align its business purpose with long-term goals, and to meet the needs of customers, employees, partners, and communities.
According to the authors, another example of a company that has understood its responsibility to its stakeholders is Verizon Communications. During the Covid-19 pandemic, the company avoided furloughing its 135,000 employees and increased pay for engineers and other staff performing essential services.
Verizon has also pledged not to end contracts for customers who cannot pay.
Forbes has rated Verizon number 1 in its list of the 100 largest employers among US public companies for its response to the public health crisis.
2. Define and deliver a clear purpose that enables agility
The second imperative for companies to adapt to the new normal is purpose. A well-defined and shared purpose, which aims to meet stakeholder needs in a conscientious way, provides a powerful lens for agile strategic decision-making.
"The Covid-19 crisis has demonstrated how companies that integrate a clear purpose into their actions can enable agility for a greater cause," say the authors.
An example of this integration can be found in the software company SAP and its aim to "help the world run better and improve people's lives." At the onset of the crisis, SAP used its cloud computing capabilities to develop an app in record time — just two days — to help the German Federal Foreign Office coordinate the repatriation of 120,000 people stranded overseas.
A well-defined and shared purpose provides a powerful lens for agile strategic decision-making
The company also developed a cloud-based application for the City of Hamburg and its development bank to enable the rapid and secure disbursal of funds to small businesses and the self-employed.
"These initiatives came naturally to SAP as they aligned with its corporate purpose and leveraged on its core capabilities, which allowed managers and developers to be agile as circumstances changed," state the researchers.
3. Encourage the participation of employees, partners, and citizens in co-creating the future
The pandemic has also made more evident the value of sharing knowledge and expertise. An example is how companies and individuals came together to build innovative solutions to solve the problem of shortages of personal protection items and medical equipment.
For example, engineering company Bosch and Randox Laboratories built on an existing relationship and shared knowledge to co-create and launch a fully automated, fast, and user-friendly Covid test within six weeks.
Another example is Coronavirus Makers in Spain, a network of 20,000 partners (companies and individuals) who came together to jointly design, produce, and distribute more than half a million individual protection items for health institutions to fight Covid.
A conscientious future
Companies that have embedded a purposeful and participative approach to creating value for all stakeholders are in a good position to tackle the challenges of Covid-19. Why?
The authors say it is because these organisations recognise their broader responsibilities to humanity and have partnerships in place that act with agility. "The same attributes will be essential in a post-Covid world – where expectations for businesses to act in a conscientious way will be heightened," the researchers conclude.
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