Is a good business good for business?

There is much talk these days about responsible business, and the need for greater corporate responsibility, perhaps more talk than action in many instances.

There is much talk these days about responsible business, and the need for greater corporate responsibility, perhaps more talk than action in many instances. The recent Davos summit was dominated by debates around saving the planet, fairer economics and better business reflecting this current mood.

Last summer there was a move by several Davos regulars to remove the idea of shareholder primacy, and 200 business bosses put delivering value for shareholders last on their list of five factors for determining corporate purpose. The others on the list were customers, employees, suppliers and communities.

So, where does this leave the already overwhelmed business owner? Can you run your business for the greater good and still have a good business for yourself? I believe that the answer to this is yes, and it does not necessarily mean that you sacrifice business efficiency.

The issue of casting aside shareholder primacy is an interesting one, given that UK law is based on this as a principal, although changed to an extent by the 2006 Companies Act.

In my view, what is often happening is that these different aspects of business are being seen as opposite and opposing which I believe is wrong. I see that the primary aim of a business must be profitability, otherwise nothing else can happen given it will not survive. But taking the five factors given above, any business that ignores the needs of its customers, employees, suppliers and community to maximise profits is taking a short-term view that will fail. If a business focuses on these factors then it is guaranteeing its medium to long term prospects, and therefore looking after its shareholders.

So, what needs to change? Well if you already have a focused strategy and strong values for your business which are encapsulated within your business plan, probably little if anything. If you do not feel confident that this is the case then consider the following questions;

  • Do you have systems in place to ensure that you deliver products/services to your clients on time and fit for purpose? Do those systems also monitor customer satisfaction, and follow up on any issues raised?
  • Do you ensure that your team are fairly treated, properly motivated, and rewarded fully for their efforts? Have you schemes in place to protect key employees, and safeguard their future with you?
  • Do you have systems in place to ensure suppliers are treated fairly and paid on time, subject to them having delivered satisfactorily?
  • Does your business plan include your contribution into the local community, and is this properly resourced in your budgets in terms of time and money?
  • Do your business forecasts show the right level of profitability to sustain your plan, and make a return for the shareholders?

If you cannot answer yes to all of the above then you need to revisit your strategy and business plan.

I believe passionately that businesses need to accept responsibility to all stakeholders; customers, employees, suppliers, communities and shareholders. I do not think that ranking the stakeholders is necessarily helpful. A balanced business plan that delivers on all fronts will benefit all, and produce a profitable business in the long term.

A good business certainly can be good for all.

Chapman, Robinson & Moore

For over 30 years, we have been the go to trusted advisers for our clients, supporting the start, development and exit of their own business.

Tony Hobbs

Managing Director

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