Last month we shared the first round of answers to the questions you asked Dr. Kotter about the Business Roundtable’s “Statement of Purpose of the Corporation”. This month we are following up with a few more answers! 
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More Answers from John 
In October, we asked if you would take a brief survey about the Business Roundtable’s “Statement of Purpose of the Corporation” and we included an option to ask Dr. Kotter a question about it. Last month we shared the first round of answers to the questions you asked and this month we are following up with a few more answers below:

What is the most significant change that companies can do to show immediate progress related to the recent directions defined in the Statement of Purpose?

The restatement of purpose has significant implications on virtually all the activities within a business. The most impactful first step, therefore, may be simply a serious discussion about the implications of this broader view of stakeholders on the business’s activities. For many of the best run companies, not too much will change as a result of such an exploration because they have always taken, or at least today already take, this broad perspective. For other organizations, the changes will be greater, in some cases very significant and complex. Specific actions will vary but could range from: reviewing executive compensation to ensure it incentivizes long-term performance, not just short-term financial results; to creating more forums to introduce the voice of the customer; to reviewing employee benefit programs through a more holistic view not just a short-term cost analysis. The stockholder primacy in the last few decades has often driven an incredibly narrow focus on the quarterly reporting cycle. Quite possibly the biggest impact of considering all stakeholders in decision making will be a shift away from this very one dimensional, time consuming, short-term exercise. 


In your Op-ed you mentioned the publication coming out in 1992, indicating what seems obvious to most except the C-Suite. Why do you think it has taken so long for the concept of full stakeholder inclusion to take on?

As I stated in a response to another question in last month’s newsletter, it could be a tipping point issue. The last decade has seen much greater activism, customers who are sensitive to issues like climate change, a workforce that has different expectations, and some attention-grabbing headlines about the negative consequences of short-termism at corporations. All these combined with the accelerated rate of change and the corresponding need to pay closer attention to all relevant factors, especially key stakeholders, are putting a greater spotlight on what our 1992 study showed. It is becoming more and more a question of simply surviving let alone excelling.

Are the five parts equally important or is it possible that there is some kind of priority?

The issue of prioritization only comes up if there is an immediate trade-off to be made in decision making – i.e., with $X available in the budget, should you increase employee pay or benefits or decrease prices to customers? While in the short-term, these trade-offs do exist, in the long-term they do not if your goal is to really excel. All stakeholders must give you an A grade. Anything less introduces risks that undermine excellence. Now there are a number of different theories about causality: some say that if you take care of your employees, everything else will sort itself out well; others say the same but emphasize customers or stockholders/profitability. But all these notions end up at the same place: some dynamic leads to well-cared-for customers, employees, owners, and any other relevant groups. 



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Russell Raath, president of consulting at Kotter, a strategy execution and change management firm, says WeWork’s planned turnaround will require hard work to execute.

   

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