The Business Roundtable updated its mission statement, shifting the position it has held since 1997 that the "primary purpose of business is to increase shareholder profits." The new position, in a statement signed by 181 of its members, shifts the focus from purely profits to people, stating that the purpose of a corporation is to promote an "economy that serves all Americans."
The move may not come as a shock to HR, experts told HR Dive.
In a lengthy missive, the Business Roundtable committed to: delivering value to customers; investing in employees; dealing fairly and ethically with suppliers; supporting the communities in which they work and — listed at the end — generating long-term value for shareholders.
What does this actually mean for the future of business — particularly for HR professionals who have already been focused on their people?
Why create a new purpose for business?
The way businesses work has fundamentally changed over the last few years, becoming more employee-driven, Dania Shaheen, VP of strategy and people operations at Kazoo, told HR Dive in an email. Corporate leaders saw it was time to put the driving force of their companies — their people — at the forefront. "By shifting their focus beyond revenue and earnings to include the employee experience, customer experience, and environmental initiatives, business leaders are acknowledging the impact their companies have to all their key stakeholders and the value in better business practices," she added.
"At the end of the day, there is no true value for shareholders if an organization's employees are not engaged, productive or reliable advocates for the companies they support," Mary Poppen, chief customer officer at Glint, said in an email. The new statement upends the outdated mindset of maximizing profits at any cost and placing the employee and customer ahead of the shareholder, she noted. "That being said, changing the purpose of a corporation requires continuous action and will entail substantial changes far after the ink on this statement dries," she said. "Companies are in the process of realizing that people-first organizations drive greater value, higher performance and profits. We should expect to see companies of all sizes activate this change across their organization."
Blair Taylor, partner at PwC Consulting, People and Organization, told HR Dive this is a vital topic and something he's been working on for decades. "I couldn't be more excited by the news from the Roundtable," he said. "I've worked in the corporate sector for two-thirds of my career driving these kinds of initiatives, the other third in non-profit and community government."
Taylor said he believes the updated statement came now partly due to employees from the bottom up expecting better. Millennials are pushing organizations to think about their engagement with society; a majority, he told HR Dive, say community engagement is important to them. Companies are also reacting to the marketplace. "The new purpose to think about communities is driven by the fact that we need to rethink how we do business and get to market," Taylor said. "The market is more diverse, and so are the clients. How do we attract them and the talent to serve them?"
To that end, companies are getting more involved in broader social issues in part because it is in "their self-interest to do so," he noted.
"We're at an inflection point, a time to reflect and rethink how we do business," he said. "If society fails, business fails. We need to add enough underpinnings to some of the cracks for our own survival, by considering how we engage in societal issues."
What impact does the new purpose have on HR?
The Business Roundtable's new purpose confirms what HR already knew, Shaheen said, and it reaffirms HR's mission of shifting focus internally and investing in employees through efforts like diversity, inclusion and belonging and improving the surrounding communities.
But organizations are also starting to think about how to connect community and brand to solve problems, Taylor said. When HR thinks about the top issues that affect communities, that can strengthen talent pipelines. Things like volunteer engagement and community involvement boosts recruitment and retention — and such actions make communities want to see the company succeed, too. In melding these worlds, the results may be measurable: better recruitment, improved retention rates and more D&I successes.
"Companies that are beginning [to do] or have done community outreach for decades are making their work more prominent," Taylor said. "When you look at the companies that survive and outperform, these are the ones that have been doing good for decades. A purpose-led company contributes to the bottom line. It's less of us versus them and more how do we collectively bring philanthropic and corporate together to solve problems."
Regardless of what becomes of the Business Roundtable's statement, Richard Burke, CEO of Envoy Global, said in an email his organization has always believed its success depends on hiring the best talent and empowering them to do great things. "If we succeed at that, our company will flourish as will those we serve. In so doing, all our constituencies will advance, obviating the need to choose the interests of one over the other."
Leveraging purpose and moving forward
"How do you solve an issue in the community without business at the table?" asked Taylor. Nonprofits have to be proactive in reaching out to the corporate sector, he said, and businesses need to reach out to capitalize on the connections in the community that nonprofits have, too. "We need to create a virtuous circle. Business must find the issues that matter to the community so they can put their weight behind solutions," he said.
People must be treated with respect and dignity, Burke said. "At work, I try to create an environment where people feel valued and able to make the most of their potential," he said. "Seeing and honoring this potential creates the greatest impact for the company, our customers and consequently our shareholders."