Authenticity, fairness and customer loyalty

Sure, profits may be down 26% as it strives to maintain cost competitiveness, but John Lewis is still outperforming most of the high street. Profits were still a very respectable £279.6m in 2008, and sales were even up 3% on last year to £6.79bn.

Equally significant, though, is that it’s been able to pay its staff a 13% bonus, and there can’t be too many companies able to do that right now.

Of course, the main reason for that is the John Lewis partnership philosophy – all its employees (or ‘partners’) are co-owners of the business, with profits being shared among them.

Picking up on my previous post, what’s really interesting about this is how the internal culture of the organisation has so indelibly imprinted itself on the minds of consumers.

A more textbook example of an authentic brand you couldn’t hope to find – the employer brand (‘A different sort of job’) and the corporate/consumer brand (‘Never knowingly undersold’) evidently united by a core thought of ‘fairness’.

The absence of shareholders is undoubtedly a major proof-point behind this brand story – the principle that, without the need to play to their demands, John Lewis is free to focus all its attention on looking after its customers, its suppliers and its staff.

Again, that idea has clearly implanted itself in consumers’ consciousness. Indeed, watching reports on Newsnight the other night, it was remarkable that, even in this downturn, the thought of shopping anywhere else simply didn’t enter John Lewis customers’ minds.

They eschew trading down because they perceive shopping with the costermongers inevitably involves some sort of compromise – either on quality, on service or on ethics. For other retailers to cut prices, whilst maintaining profits and shareholder returns, someone else must be taking the hit – if not them, then someone else in the supply chain.

The essence of the value proposition? John Lewis may not be the cheapest, but ‘you get what you pay for’ and no-one gets screwed in the process. And judging by the results, it’s one that appeals to a lot of people.

So should John Lewis’ partnership model be seen as the prototype for a different, more responsible form of capitalism? I don’t know.

Regardless, what I do know is that many other businesses could learn a lot from them – about what it means to be authentic, to be responsible, and how both can make a huge difference to a company’s competitiveness.

It’s the culture, stupid!

Remember, “It’s the economy, stupid,” the phrase coined by political strategist, James Carville, back in 1992? Well, the more I think about my sphere of interest, the more the title of this post rings true.

The more I think about how companies can create brand and competitive advantage, the more I am convinced that it needs to be generated from the inside out.

Whether we’re talking about the specifics of establishing CR and sustainability as a key source of advantage, or brands’ more general search for the ‘authentic voice’, it’s clear to me at least that all roads lead back to organisational culture.

It’s the point at which CR becomes fully integrated into strategy and culture (rather than just a self-contained box for all the ‘good stuff’) that companies begin to interrogate the way they conduct business and identify opportunities to create new value through product and process innovations. Culture is the key to delivering on CR 2.0.

It’s the proper branding of internal culture that begets authenticity. Culture is the common glue that holds together the whole ‘system’ of corporate brand, employer brand and employee/stakeholder engagement.

Look through the lens of organisational culture and you’re offered up some interesting perspectives on branding – in particular why authenticity (to bastardise another phrase) is ultimately in the eye of the beholder, and why companies don’t actually own their brands.

Take Edgar Schein’s theory, for example, that culture exists on three levels:

1. Surface manifestations – the culture’s most visible and accessible forms (touchpoints such as stories, symbols, language and physical environment)
2. Values – beliefs underpinning surface manifestations (shaped by shared learning or by views of the original founder/current senior management team)
3. Basic assumptions – invisible, preconscious beliefs held about the organisation and how it functions (relating to human behaviour, organisational relationships and the nature of reality)

The point? The real culture (and by extension, brand) exists at the level of tacit assumptions, which cannot be accessed or managed directly; it’s a perceived reality that exists only in the minds of customers, employees and other key stakeholders.

The levers that businesses can actually pull will only work indirectly and over time, as the results of interventions (positively and consistently experienced by stakeholders) gradually filter down to reshape those basic assumptions.

More carrot, less stick

I had Radio 4 on in the background yesterday and heard a swathe of listeners’ texts and emails calling for tougher regulation of the banking sector – this following bank chiefs’ profuse apologies in front of a parliamentary committee.

Such reactions are, of course, entirely predictable. But, as the panacea for avoiding future crises, they’re also completely misguided.

The idea that tougher and/or more effective regulation can prevent the kind of behaviour that led to the collapse of the banks is predicated on some massive assumptions – not least that an authority exists (or could be created) that is even capable of policing global financial institutions. Penalties only carry a threat if there’s a realistic chance of being caught.

Even if it were practically possible, you also have to question whether it’s desirable to have this as the central plank of any strategy to encourage more responsible and sustainable behaviours.

Put too much emphasis on regulation and you risk creating a scenario where people can effectively devolve responsibility for their actions – in essence, it becomes the regulator’s responsibility to root out any wrongdoing; anything that escapes their scrutiny must, by definition, be OK.

In any event, as I have argued repeatedly on this blog, compliance with regulations represents the bottom rung of the ladder where CR and sustainability is concerned. The major gains for business, society and the environment come when companies raise their aspirations, using sustainability as a lens through which to challenge the existing business model and identify opportunities for innovation (a la Interface).

In that light, surely it makes more sense to use a lot more carrot and a lot less stick? The onus should be on rewarding good behaviour, rather than penalising the bad. That’s the only way to achieve the necessary change in mindset and embed sustainability in company culture.

The thorny issue of bankers’ bonuses is a case in point. I don’t believe for a second that curbing bonuses will lead to a mass exodus of talent (there’s more than a whiff of the prisoner’s dilemma to that argument).

Nevertheless, I suspect the secret to avoiding future crises lies less in punative measures – e.g. reducing their size – than it does in changing the criteria by which performance is measured and rewarded.

What we have here is a case of WYMIWYG – What You Measure Is What You Get!

Giles Gibbons on why banks should go back to basics

If you read my previous post, the importance of seeing the bigger picture, you’ll know I almost sparked a bit of a spat with an IABC colleague when I questioned what his employer’s programme to promote clean water and sustainable water use had to do with responsible banking. 

Nice, then, to read a great article in Ethical Corporation News today, in which Giles Gibbons - founder and chief executive of CR consultancy, Good Business – suggests much the same thing.

For him, too, it’s responsible lending and investment that comes top of the list in the materiality stakes. And it’s social issues such as the impact of debt on society, not the environment, that’s most relevant and important to a bank’s core business. (By all means address environmental issues, but not until you’ve dealt with the other stuff first.)

In fact, there are remarkable similarities between what he says and a number of previous posts on this blog.

You’ll know by now the tired drumhead I beat about “CR without HR is just PR” – that businesses must first demonstrate how CR is embedded in their own organisations and along the value chain. That message comes over loud and clear in Giles’ article too.

As does the idea that this economic downtown might actually prove a blessing in disguise, as I suggested in my post on CR and the recession - sorting out the wheat from the chaff, the superficial from the strategic, and forcing businesses to think much harder about what really matters to their stakeholders.

Not entirely surprising, then, that I should find myself agreeing with every single word! Even if you don’t, read it anyway. It’s a thoroughly researched and well-reasoned piece that deserves a look.

Diversity and strong cultures: never the twain shall meet?

It’s rare to find any sizeable company that doesn’t have something to say on the subject of diversity.

However, many of those same organisations are also wont to wax lyrical about their “unique culture” and the “Company X Way” of doing business.

Reflecting on my earlier post on the language of diversity, it struck me that a genuine commitment to diversity and a strong corporate culture ought to be mutually exclusive.

After all, a genuine commitment to diversity is characterised by the phrase, “come in, and now we are a new group.” If we truly respect and value difference, then the group dynamic is redefined by each new member.

Strong cultures, on the other hand, suggest good, old fashioned brandwashing: “come in, and we’ll show you how to be just like the rest of us.”

Intriguing insight or pointless postulation? You decide!