Throughout my 20-year corporate career, I was often asked to step into complex situations and help fix what was broken. Most of the time, I followed a simple formula: Break down the problem into smaller pieces, focus on the pieces with the greatest impact, talk about the problem in terms that were understandable, and solve the parts of the problem with the biggest impact.
What I often found was that we, as humans, tend to make things more complex than they need to be. We use acronyms, create new buzzwords, and add extra steps to give the perception of creating value or doing work. Most of the time that added complexity creates confusion which in turn diminishes the effectiveness of the organization and can lead to more problems.
I’m approaching my one-year anniversary with seedership. During the past year, I have talked to hundreds of community leaders, small business owners and employees of those small businesses and I have found a problem: Our society has made the simple act of making a difference in the community difficult to understand. Let me share why.
Take for instance these buzzwords: “Philanthropy,” “Corporate Social Responsibility (CSR),” “Triple Bottom Line,” “Conscious Capitalism,” “Social Enterprise,” “Cause Marketing.” These are all terms and theories used to describe business involvement in the community. When done right, it’s simply showing that you care in an authentic way.
This type of corporate jargon can create confusion for small business owners. So, I looked at this situation similar to how I looked at the problem during my corporate career and broke it down to smaller parts so I could better understand. I found there is a common theme and it boils down to one simple formula.
There is a heightened focus on how businesses operate and the impact they have on the communities in which we live, work and play. Last year, the Business Roundtable issued a statement signed by 181 CEOs of major U.S. corporations - including Apple, Coca-Cola, FedEx, JPMorgan, and Walmart, modernizing the definition of their purpose to work for the benefit of all stakeholders – customers, employees, suppliers, shareholders and the communities where they operate. This is a huge philosophical shift away from the age-old notion that corporations exist principally to serve shareholders.
In January, the CEO of Blackrock, the world’s largest investment firm, shared in his annual letter that the company is overhauling its investing strategy to make sustainability the “new standard for investing,” which will include launching new active and passively-managed funds that focus on socially responsible investing. Recently at the World Economic Forum, the CEO of KPMG, one of the ‘Big Four’ accounting firms announced they are building an accountability tracker to help Fortune 500 companies measure and prove how much good they are doing.
THE RESULT: This change in focus is not a trend. In fact, 85% of the S&P 500 and 90% of the largest companies in the U.S. are now filing sustainability and CSR reports. It will not fade away in the coming months or years. More importantly, it is just not for big business. There are significant changes in society that will require small businesses to respond in the same way as large corporations.
Consumer Market Impact
The way in which consumers are purchasing is shifting. According to a 2018 Cone study, 66% of consumers would switch from a product made by a company that shows a strong focus on charitable giving. Further, the study found that 78% of American consumers believe businesses must do more than just operate to drive profits, they must make a positive impact on society as well.
Millennials (born 1981 - 1996) now represent 56% of the national workforce and 30% of retail sales. Generation Z, aka zoomers (born 1996 - 2010), is following close behind. According to the 2019 Gallup How Millennials Want to Work and Live report, these generations are motivated by more than just a paycheck, they want to feel like their careers and purchasing decisions are important in the larger picture. This marks a significant generational motivation shift from the previous generations.
Consumer Trust Impact
Each year, Edelman produces a Trust Barometer study. This study has found that people today grant their trust based on two distinct attributes: competence (delivering on promises) and ethical behavior (doing the right thing and working to improve society). The study encompasses four types of organizations: Businesses, Non-Governmental Organizations (NGOs), Media and Government. This year’s study found that Businesses rank highest on the scale of competence and second-highest, behind NGOs, on the scale of ethical behavior. This further demonstrates that society is losing faith in the institutions historically relied on to improve society and are looking for businesses to step in and make a bigger impact.
The report also finds that trusted companies have stronger consumer buyers and advocates and that trust drives workplace recommendations by employees. In fact, 73% of respondents believe a company can take actions that both increase profits and improve conditions in communities where it operates.
THE RESULT: More and more consumers are voting with their wallets. They are searching for and supporting businesses that are making a difference in the community. Equally as important, how a company gives back to the community is a key factor for employees when determining where to work.
The Convergence and Importance for Small Business
The changing focus of business and shifts in society all point toward one common factor: a requirement for any business to take on a role in improving their communities. Businesses that do not respond in this manner to the changing environment will undoubtedly feel pressure to grow in order to maintain a vibrant workforce.
A survey by the Better Business Bureau found that 84% of consumers trust small businesses more than large businesses. Additionally, the Edelmen Trust Barometer found that family-owned businesses are the most trusted type of business by a large margin, followed by privately owned businesses. This indicates that established institutions like publicly lead corporations and government organizations are losing trust, while more intimate and grassroots-level small businesses are gaining traction in their place.
Small Businesses Have Bigger Community Impacts
One of the greatest advantages small firms have over their larger competitors is a more emotional connection to the community. The visibility of small business owners and their employees in the local area shows that you care about more than just dollars and cents. You care about the community and the community cares about you because to you it’s more personal.
THE RESULT: Small businesses have an advantage over larger corporations when it comes to gaining the trust of customers and employees.
A Simple Formula For Small Business
My interaction with small business leaders showed that they understand being part of the community is not only about providing a product or service, but it is also about taking a leadership role and supporting the community to help it thrive and grow. That is why a SCORE study found that small businesses give 250% more when compared to larger corporations. Businesses of all sizes recognize that in today’s shifting landscape, the best way to succeed is by building a community of supporters and advocates. And for small businesses, the best way to build that community is through kindness.
When you take all of the various ways in which we try to categorize how businesses are responding to the changing societal needs, it can be simply explained by being kind across all stakeholders to build a stronger community. Building that community does not happen overnight and it is not easy. It requires organizations to spend time, energy, and resources to show that you care. And this is not about one-off projects or holiday giving traditions, you must show that you care about the people in the community or something they care about consistently. That will, in turn, build trust which leads to deeper connections with your customers, employees and the community.
But showing you care is not enough. With the continuing change in business focus and shifts in society, small businesses will need to adapt in order to grow. Customers are using their purchasing power to support companies that do good, and employees want to work for these companies. So don’t make it difficult for them to find out what you are doing in the community. It should be as easy, clear and accessible as you make finding information on your products and/services, their attributes and pricing.
What you do in the community must be visible, transparent and authentic. If it is not visible, when customers and employees are looking for businesses to support and work at, you are being passed over. If it is not transparent and authentic, you will quickly lose trust.
THE RESULT: The simple formula: use kindness to build your community and, in turn, grow your business. And, small businesses are uniquely positioned to use kindness to build deeper connections with the community.
While there are many complex terms and theories to address and discuss the changing focus of business and shifts in society to address many of the world’s largest problems – at its simplest form, businesses must consistently be kind and use transparency when addressing important issues in the community. Small businesses have a significant advantage to build trust by spending time and energy showing they care about the communities in which they operate. But in order to capitalize on this advantage, they must be visible, transparent and authentic.
Interested in learning more about the ABCs of Doing Good and why it’s important for your business goals? Join us on Thursday, February 20 at 2 p.m. (EST) for an exclusive seedership webinar. Sign up to RSVP now: https://event.webinarjam.com/register/ry87osp.