Companies Transition into Social Enterprises

Corporate well-being today depends on more than outstanding financial performance and high-quality products and services.
David McCannApril 3, 2018
Companies Transition into Social Enterprises

It’s no secret that today’s customers and employees are increasingly attracted to companies with a strong social ethos. But a new, massive study of the topic paints a vivid picture of just how crucial social capital has become.

Deloitte surveyed more than 11,000 business and human resources leaders and interviewed executives of many leading companies. Based on information gleaned from those efforts, the firm’s study report describes an ongoing, broad transformation of business enterprises into social enterprises.

“Organizations are no longer assessed based only on traditional metrics such as financial performance, or even the quality of their products and services,” Deloitte states. “Rather, [they] are increasingly judged on the basis of their relationships with their workers, their customers, and their communities, as well as their impact on society at large.”

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The report points to three “powerful macro forces driving the urgency of this change.”

First, the power of individuals is growing, with millennials at the forefront. For the first time in mature markets, young people believe their lives will be worse than their parents. That leads them to question “the core premises of corporate behavior and the economic and social principles that guide it.”

Second, businesses are increasingly expected to fill a widening leadership vacuum in society, according to Deloitte. There is a widespread perception, across the globe, that political systems are growing more polarized and less effective at meeting social challenges.

“Citizens are looking to business to fill the void” on critical issues such as income inequality, health care, diversity, and cybersecurity “to help make the world more equal and fair.”

Consider the organization recently created by Amazon, Berkshire Hathaway, and JPMorgan Chase to lower health-care costs for employees. The effort is “tackling an issue that government cannot solve on its own,” the report suggests.

Third, technological change is having unforeseen impacts on society even as it creates massive opportunities to achieve sustainable, inclusive growth.

For instance, machine learning, which was barely discussed in corporate circles a few years ago, is now simultaneously one of the hottest trends in IT and a source of tremendous anxiety about potential job losses. “Many stakeholders are alarmed, and they expect business to channel this force for the broader good,” Deloitte says.

What behaviors define social enterprises? For one, they listen to the external environment — “not just business partners and customers, but all parties in society that an organization influences and is influenced by.”

Social enterprises also invest in the broader social ecosystem, starting with their employees. That means treating all workers — whether they’re on or off the balance sheet — in a fair, transparent, and unbiased way.

Finally, social enterprises seek to actively manage their position in the “social ecosystem” by engaging with stakeholders and strategically determining and pursuing the kinds of relationships they want to maintain with each.

“This cannot be done in a siloed way,” says Deloitte. Rather, it requires strong collaboration among leaders — both across the organization and outside of it.

Leaders should form relationships with the governments and regulatory bodies that shape the “rules of the road,” and work collaboratively with them to create a fair, just, and equitable marketplace, according to the report. Leaders also should partner with communities and educational institutions “to help sustain a steady flow of talent with the skills that will allow the organization — and the broader economy — to thrive.”

The Transition in Action

The report identifies a number of human capital management practices that, if adopted, could help companies transition into social enterprises.

One such practice is what Deloitte calls the “symphonic C-suite.” Senior leaders increasingly realize that they must move beyond their functional roles and operate as a team, according to the report. More than half (51%) of survey participants rated C-suite collaboration as very important.

However, 73% of respondents said their C-suite leaders “rarely, if ever, work together on projects or strategic initiatives.”

Companies also could improve their management of the “workforce ecosystem.” The report points out that more than 40% of U.S. workers are now employed in “alternative work arrangements” such as contingent, part-time, or “gig” work.

Many respondents said they expect to employ more such workers this year. At the same time, only 16% of them reported that they have an established set of policies and practices to manage a variety of worker types. Additionally, only 29% of those surveyed said their organizations track these workers’ compliance with work contracts, and just 32% track their quality of work.

Deloitte says companies also should:

  • Create employee reward programs that are delivered more continuously, aligned more closely with individual preferences, and based more fully on employees’ whole contributions to their team and the organization.
  • Consider reshaping their career models, scrapping the traditional “up or out” ladder in favor of approaches allowing workers to continuously reskill and gain new experiences.
  • View the aging workforce as an opportunity to maintain “a proven, committed, and diverse set of workers,” given the reality that almost all developed economies now have birth rates below the replacement rate of 2.1 per woman.
  • Communicate a “single, comprehensive, and authentic” strategy that defines “who the company is, what it says, and what it does.”
  • Not just assess which work tasks can be automated and what technologies to use, but also create new, meaningful work that human beings will be eager to embrace, notwithstanding the need to collaborate with intelligent machines.