Success is more than financial profit – a ‘paradigm shift’ in business driven by changing stakeholder expectations By Feargal O’Rourke, PwC Managing Partner
The CEO environment is a challenging one. Many CEOs recognise the wider stakeholder expectations of their businesses. The views of customers and other stakeholders, including employees and investors, aren’t just evolving but diverging.
PwC’s 2016 CEO Survey highlights a shift in the mindset of CEOs with a greater focus on delivering beyond just profits. Global companies are more concerned than Irish companies about redefining their purpose in the wider business ecosystem to build trust and remain relevant. We call this the ‘paradigm shift’. Nearly three-quarters of Irish CEOs believe that business success in the 21st century will be driven by more than just financial profit. The ability to be successful in the long-run will also be determined by an organisation’s impact on the wider society as customers and employees will take these factors into consideration in their decision to do business with/work for the organisation. While profit remains critical, it cannot be at the expense of an organisation’s wider role in society and it is important for CEOs to get this balance right. Customer behaviour, in particular, has become more complicated as values and buying preferences evolve. Reshaping companies built on profit alone into ones where profit and purpose combine, is not going to happen quickly or easily, but it’s a transformation that is already starting and that businesses need to keep pace with.
The vast majority of Irish CEOs tell us that in five years’ time successful organisations will prioritise long-term over short-term profitability. However, just half are of the view that creating value for wider stakeholders helps them to be profitable. In the future, customers will put a premium on the way companies conduct themselves in society but less than half of Irish survey respondents think that customers will seek relationships with organisations that address wider stakeholder needs. These trends are broadly similar for their global counterparts.
While setting their radar on a wide range of stakeholders, the survey highlights that Irish CEOs lag their global counterparts when it comes to making many of the changes needed to respond to changing stakeholder expectations. Less than half of Irish business leaders confirm that in five year’s time the purpose of successful organisations will focus on creating value for wider stakeholders compared to nearly three-out-of-four globally. Irish CEOs are also behind in a number of other key areas, for example, recognising that top talent prefers to work for organisations with social values aligned to their own; addressing wider stakeholder needs; reporting on financial and non-financial matters; seeking ethical investments and Corporate Social Responsibility being core to everything they do.
That’s a lot of change in a relatively short time, not just on the customer front, but on talent and investor expectations and right down to the purpose of the organisation. The survey suggests that successful businesses in the future will not be driven by profit alone but by a much wider range of priorities driven by what stakeholders expect.
You can read the full survey here