The ROI of Human-centred organisations

Fernando Polo

3 October 2019

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The idea of Human-Centred Organisations (HCOs) is nothing new. Three major trends have been converging into it. Firstly, digitalisation empowers individuals to access and share information and organise collectively using crowd methodologies. Secondly, companies have long acknowledged the rise of consumer power and adopt human-centred design methodologies to put the user at the center of the stage and finally, a roaring trend is challenging the idea that the single purpose of a corporation must be shareholder value maximisation.

In August 2019, after 20 years defending this idea of maximising economic returns to owners, an American association of big corporates CEOs, the Business Roundtable changed in a statement their view of the purpose of an enterprise, and invited all the corporate stakeholders – customers, suppliers, employees, communities and shareholders- to the table.

Every time I am on a stage defending the idea of HCOs I see eyeballs longing to believe, followed by networking breaks where skepticism about the return of the HCO investment and a visible lack of trust in people -disloyal clients, disengaged employees-. Everyone will admit the imperative of customer-centricity but few are willing to walk the extra mile to move their employees from the center of their powerpoint slides to the heart of organisations underwhelmed by bureaucracy and hierarchy. Even fewer executives will happily sacrifice profit to share it with the wider society. 

But these three journeys (consumer, co-worker and citizen) are intertwined and truly HCOs are able to serve the three of them, not just one. Even Amazon, one of the most customer centric companies in the world, criticised for their HR and sustainability policies, is taking steps (like the climate pledge) to tackled the three journeys conjointly.

So how can we convince decision makers that becoming an HCO is the best alternative for the long term? Proving a clear ROI, showing that economic gains -not just rosy endeavours- are on the table, too.

Customer-centric companies are winning

Peter Drucker already said that the purpose of a company is to “create a customer”. The consumer of our days is the winner of a crowded landscape of companies willing to serve them where lower entry barriers increase competition and digitalisation decrease revenues and margins.

As a recent Economist Intelligence Unit report states, “technological leaders tend to be customer-centric leaders, too. The survey shows a strong correlation between how well an organisation believes it has adapted to various recent technology trends, compared with its industry peers, and its preparedness for greater customer-centricity.”

The user-centricity obsession that most B2C technology companies are able to implement has taken stock markets by storm in the last 10 years, with traditional companies losing ground and five tech companies occupying the 5 top positions by market capitalisation.

Engaged employees are the secret recipe behind successful companies

While most business leaders would say publicly that people are the most important asset, many of them would admit privately that their employees are disengaged and don’t trust them.   

The co-worker journey is polyhedral and management literature is full of ideas and theories to tackle it. Leadership and corporate culture are classics, newer concepts (fads?) like corporate purpose or “employee experience” (mimicking the customer journey to focus on pain points and wow moments) are gaining momentum. Attracting and retaining talent might be the aim, but from our perspective, the focus should be intrinsic motivation and engagement. The ROI of engagement has been proved many times. Organizations with engaged employees outperform those with low employee engagement by 202% according to a Dale Carnegie whitepaper. Gallup has been researching the field of engagement for decades now and they found that those businesses with employee engagement scores within the top quartile have 70% fewer safety incidents than those in the bottom quartile. According to research conducted by Towers Perrin, companies with engaged workers have 6% higher net profit margins.

And Best Place to Work companies outperform their peers in the stock market, as a study by Glassdoor demonstrated some time ago: “since 2009, a portfolio of Fortune’s “Best Companies to Work For” companies outperformed the S&P 500 by 84.2 percent”. Yes, as with some of the data presented above, we know that correlation doesn’t imply causality. But we all know what we are talking about.

Giving autonomy, purpose and mastery (if we followed Pink’s advice) to our employees would boost engagement and improve dramatically their journey. Not only would it make this world a happier place, shareholders will get more money back too.

And the wider society?

Friedman and Porter defended that the single purpose of the corporation is to maximise profits for the owners, but the former had already explained in different writings that this wasn’t enough and the latter changed his mind in 2011 to support the idea of “shared value”. However, in the last 40 years, the idea’s got deeply rooted and CEOs pay has been linked to stock performance, thus making it very difficult to get rid of the idea that value shared with the society cannibalises owners profit.

But as we’ve said before, the three journeys are intertwined. Digital consumers are better informed than ever, and become activist citizens that can bring down profits from companies who are actively going against communities interest, the planet or even their own employees, as was the case of Sports Direct, a UK retailer with a terrible reputation for employee mistreatment. I like to tell a fiction story about my activist daughter Elsa, who in some years will enter the labour market and earn (hopefully) a decent salary. I can foresee her using an open source AI agent to place an online order in a marketplace able to check every single transaction in a supply chain via tech mechanisms like blockchain and asking “HER” to make sure the blue shoes she wants to buy are not only nice to her taste but ranked also more than 4.7 in a hypothetical future sustainability index. What can still be seen like a choice today, might be a must in a few years, thanks in part to the radical transparency and massive computational power that technology puts forward.

B-Corps are on the rise and grow faster than their peers. Nearly 200 hundred CEOs have already capitulated. And the demand for IRS funds, that integrates Environmental, Social, and Governance criteria into investment decisions has made that “in the beginning of 2018, $11.6 trillion of all professionally managed assets—one $1 of every $4 invested in the United States—were under ESG investment strategies, a sharp increase from 2010, when the amount was close to just $3 trillion overall.”

What else do we need to convince ourselves to start transferring more shareholders profit to society to make sure that the income inequality gap is addressed by the same organisations that may have created it, while we try to stop climate change?

A great purpose to stand for 

Good Rebels crafted a simple but ambitious purpose some years ago. We want to inspire organisations to become more human-centred. We work everyday with our clients to create great digital experiences, to help them build brand awareness, customer engagement and sales in the hope that our mundane daily tasks will convince our clients to become an HCO, which in turn will make them increase their customer life-time value, will make their employees happier and create value for society.

HCOs put people at the heart of their corporate strategy, they create a compelling offer for customers, while retaining talent and being socially and environmentally responsible. HCOs have excellent net-promoter scores and encourage high-levels of customer advocacy and attract and retain young talent, who are mobile, entrepreneurial and ethically aware. They maintain high levels of trust in the eyes of society, avoiding tech confusion and insecurity regarding the current and future co-existence of humans and machines.

But above all, HCOs make more money and live longer. What else must be said to start fighting for this big idea?