4 ways your business can have social impact and be profitable
- September 4, 2019
- Posted by: Arron Skillen
- Categories: Innovation, Leadership, Small Business
It is a common misconception that businesses are either set up for a social (non-profitable) purpose or with the purpose purely to make a profit. This probably goes a long way to understanding why organisations act the way they do. Most not-for-profit organisations rely heavily on donations and have a propensity to see profits as an evil thing. Conversely, for-profit organisations have been guilty of turning a blind eye to social concerns, en-route to higher profits (banking Royal Commission as an example). The Social Enterprise concept which has risen in the past few years has provided a great middle ground. Social enterprises are Social Trader certified organisations that deliver products or services that generate a profit, but re-invest their profits into the social cause they are trying to solve. But if you still have shareholders, the push for profits will still be important, so you need to find a balance.
The rise of Millennials
In recent times, the rise to prominence of the millennial workforce has seen the demand for socially responsible enterprises increase. We want to work for companies we believe in, and that have a purpose beyond simply raising profits for the owners. An article in the Economist recently discussed this very point. There has been a shift in mindset recently in the US. 180 CEO’s of big US companies (such as Wal-Mart and JP Morgan Chase) have indicated that their new corporate strategies and purpose was to not only serve shareholders, but also customers, staff and communities (https://www.economist.com/leaders/2019/08/22/what-companies-are-for). Whilst this should have been the purpose from the start, and could be just lip service from the big organisations, it demonstrates where the thinking has progressed to.
How do you find the balance?
Small businesses in Australia are under pressure to perform for our communities. In order to retain good staff, it is important that the business has a stand on moral and political questions. But the challenge is also needing to make profits to make ends meet. We have come up with a list of four ways that your business can address social impact concerns, but also make a profit:
1. Solve a social problem
Much like a social enterprise, your business should always attempt to solve a problem. For instance, a business I co-founded, named Corporate Commanders, has been established to deliver leadership programs specifically to Millennials and younger. These programs are attempting to solve the ethical leadership problem that exists in the corporate world. They intentionally aim at the younger generation to provide them with leadership skills that complement their innate desire for social good. The aim is that they have the necessary skills required so that in the future, we have more ethical leaders.
When you next review your business strategy, ask yourself: What is the social problem you are trying to solve. Ask questions like: “Is this product going to help the community?” “How will this service make others’ lives better?” “How am I progressing humanity with this?” This will allow you to focus your energy on a market segmentation that understands what you are trying to do, and helps immensely with your brand image. A targeted and focused segmentation has been shown to increase profits. Furthermore, you have a defined social purpose for your company, that just so happens to produce profit (sounds a bit like a social enterprise doesn’t it?). This leads to your staff believing in what you’re doing.
2. Understand your business processes
Technology disruption has been a big part of business in the past decade. There are literally hundreds of thousands of apps out there all trying to make your life in business easier. The biggest fear for some is implementing an app that will make some team members redundant. Misunderstanding what to do with your resources and simply focusing purely on profits will see this fear become a reality, which is not good. But there is so much scope in implementing technology to gain process improvement, and then redeploying your staff for ‘human centred’ tasks, such as customer service.
The first step though, is understanding your business processes intimately. Conduct a full review of everything you do to generate revenue. Then it is a matter of keeping an eye on the market to see what apps can make processes more efficient and better for you. Being able to redeploy your staff into customer facing roles invariably leads to more work, which leads to more income, which leads to more profits. So instead of integrating an app and laying off workers, businesses can utilise the efficiency to generate more profits through increased income, rather than decreasing costs. You can then provide better customer service, leading to better community outcomes.
3. Invest in your people
Many businesses are getting better at investing in their people, but we still have a long way to go. Business in the 1970’s was invested cash heavily in tangible assets (such as machines for manufacturing). These expensive machines were viewed as assets (something that delivered a revenue for the business) and were viewed as a necessary cost of business. Fast forward to today and the investment in tangible assets as reduced significantly. In fact, the 5 most valuable companies in the world derived their main value from intangible assets (think Google, Apple, Facebook, Amazon – all have brand name assets). How they get value out of their assets is through their people. They invest heavily in their people; everything from workplace environment to education.
Businesses need to start viewing expenditure in team development as an investment in an asset, rather than expense on the P&L. A happy, motivated and cared for staff member will deliver much more reliably than one who is uninspired and constantly looking for the next opportunity. Think about the manufacturing example; to stay ahead of the competition, you had to have the latest and greatest machine through updates. Human resources are no different. To stay ahead of the competition, you need to have the latest and greatest human assets; this includes upskilling (updating) your staff and trying their innovative ideas. Two heads are better than one; many heads are better than two.
4. Adapt your staffing model
Not only is investing in your people that is important, understanding how your people would like to work is also key to success in staff retention. The rise of the contingent workforce (see my Gig Economy article: https://bizeesolutions.com.au/2019/08/11/project-based-workforce/) has made the strict 9am-5pm conditions of the past really difficult to attract the best modern talent. Most millennials like the flexibility in hours, remuneration and workplace so that they can spend time on things they care about. Work-life balance; a term that should be familiar now. So understanding your staffing model is your best chance at social impact success.
If you have the ability to provide flexible work hours or working from home arrangements, there is some great advantages in providing this. Additionally, if you have the ability to provide a contingent workforce, there are possible efficiencies gained from this as well as increased flexibility for your staff. Even how you pay bonuses can be adapted. Some may wish to have extra annual leave instead of cash; or have a study course paid for. There are so many different ways that your staffing model can be adapted to allow for greater social impact (either directly or indirectly through your staff) that also equates to increased profits for the business. It all starts with engaging with your staff openly about understanding what they want and what you need.
Businesses are becoming more and more accountable to the community as well as shareholders. Gone are the days of setting up a company purely for profit purpose, no matter the cost. By adopting these four methods of balancing social impact with profitability, your business can attract and retain good staff and know that it is leaving a good, positive legacy within the community.