Profitability and growth have long been the key criteria for measuring business performance. Recently, however, notable forerunners have added softer values to their reward systems.
The remuneration criteria of Nokia and Kone chief executives, for instance, have been revamped to include responsibility measures as well as financial incentives. The new measures vary for each business, but typically include such concerns as employee welfare, social responsibility, and the reduction of emissions.
Similar patterns are emerging all over the world: responsibility targets are being set in parallel with financial incentives. The fact that reward systems are complemented with reputational criteria suggests an irreversible change in the way we build brands.
We’re in the middle of a paradigm shift, in which firms increasingly emphasize stakeholder value in addition to mere share value. Responsibility has entered the realm of remuneration, as it’s considered a competitive advantage.
In essence, leaders are being paid to build a future-proof brand.
The way we measure success has changed, because the way we create value has changed. Whereas in the past, a company would exist to create value only for its owners, today it exists to create value for its environment.
In the world of double disruption, growth can no longer be fueled to the detriment of the climate, meaning that it’s no longer an intrinsic value. Responsibility is a competitive advantage, because companies need to show that they fulfill a purpose, and that they’re able to meet the needs and expectations of their stakeholders.
Companies are expected to solve challenging global problems, as faith in political institutions is fading. Stakeholders put their trust in firms to pick up the slack. This is all happening in a hyper-individualistic setting, in which segmentation and target group theories have become obsolete. In this new reality, firms must understand how the world works and define their position in respect to their chaotic environment. Purpose is not a gimmick – the brands that can justify their reason to exist will flourish, while the rest will wither.
Purpose is not a gimmick – the brands that can justify their reason to exist will flourish, while the rest will wither.
A well thought-out brand built in open dialogue with its stakeholders is a valuable tool for enabling success. Transparent brands can fulfill the needs of their most relevant stakeholders in the long term, and a meaningful purpose gives them the best chance of survival in our doubly disrupted world.