News quiz: Who is publicly advocating for private investors to balance their investment returns with “the prosperity and security of their fellow citizens”?
If you answered BlackRock CEO Larry Fink, the head of one of Wall Street’s flagship firms, you were right. But if you didn’t know, you might be tempted to answer Bernie Sanders or someone from Occupy Wall Street.
As head of one of Wall Street’s flagship firms, Larry Fink made more than one headline by focusing his 2018 letter to CEOs on the importance of a company’s long term social purpose. His point: “Without a sense of purpose, no company, either public or private, can achieve its full potential.” In no uncertain terms, he is making the business case for corporate social responsibility.
Perhaps Occupy Wall Street had more impact than it knew. Or perhaps this shift is simply the result of lessons learned in the aftermath of the financial meltdown a decade ago. Either way, a consensus is emerging that emphasizes balance between corporations’ long-term and short-term responsibilities to all stakeholders: from shareholders and customers to employees and communities. 
If a corporation does not achieve this balance, Fink warns, “It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth.”
Fink’s letter is a call for business to step into a role that has previously been delegated to government. He notes that record highs in our markets exist at the same time as record high anxiety about our future. He also observes that our government is failing to invest in our future in a broad range of areas from retirement and infrastructure to future jobs and education for the coming robotic age. There is no hand-wringing about the state of our public affairs, just a clear call for business to do the job that needs to be done and start investing in our future.
He is not a lone wolf on Wall Street calling for companies to be more socially and future focused. Management consulting firm McKinsey has the same message: “Every business has an impact on society and the way that people live their lives…. When we support [our clients] to make lasting improvements to their performance, we also help them to scale their contribution to society.” Confirming this message, McKinsey Senior Partner Rodney Zemmel has just published a book called Go Long, with contributions from around the business world including Korn Ferry, Fortune Magazine, and the Wharton School.
To be clear, no one is saying we should sacrifice current results to achieve some utopia years from now. The quarterly report is a good barometer of what we are achieving now, and no one is doing away with it. The key change is widespread recognition of the problems that happen when the quarterly report is the only barometer of what we are doing.
It’s crystal clear to the savviest investors that a greater sense of purpose and a long-term focus is needed to balance short-term results, and create a sustainable stream of investments that we can all rely on, invest in, and ultimately enjoy the rewards of.
Here are three ways to start embracing this balance in your organization, no matter how big or small.
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Embed long-term and short-term goals throughout the organization
This starts with senior management and boards. If your organization doesn’t have a strategy or long-term planning committee, it’s time to create one. Larry Fink’s letter has a list of questions for companies to consider which can be a great way to start: “What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that will help them achieve their goals?” People at the highest strategic levels of every business, no matter how large or small, should reflect on their long-term mission and see how their short-term results are supporting strategies for sustainable success. According to Fink, this should not simply be a topic for an annual retreat, but a year long conversation about how to build values into the fabric of how the company operates.
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Balance internal and external factors
Every company serves its customers, its employees, and its community. Resilient companies make plans to serve stakeholders in good times and bad. By creating policies and plans to respond to potential problems, companies become poised to be even stronger after difficulties. Companies can directly promote employees’ long-term well-being with benefits such as health care and pension contributions. Quality control and innovation can also have a direct affect on how your products and services will contribute to customer well-being now and in the future. Beyond that, there is a wide range of external factors to plan for that will have indirect impacts on sustainable results. To retain employees and reduce turn-over, create an empathetic workplace with flexibility for personal time (doctors, car maintenance, personal and family obligations) and a personal leave plan for when employees experience larger personal difficulties (losing a family member, serious family illness, and the like). Take care of an employee during a crisis and you are likely to have a loyal employee who will go above and beyond average effort when they are back on track. Some companies are instituting up to six-month paid maternity leave to retain top female talent. Companies should plan for other external factors too. If your taxes and regulatory situation changes, the same will be true for your competitors. But how you and your competitors respond can be a differentiating factor. If your city has a 100-year flood, a devastating fire, a mass shooting, or any other of a number of disasters that can immobilize a community, ask not just how your company will be affected but how will your company respond? Contributing to the betterment of the community will gain you grateful customers for life. Businesses can help make the lives of people they touch better in ways that bring that goodwill back.
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Incentivize employees to balance long-term growth and short-term results
Your employees will do what they are incentivized to do. For most companies, this means reviewing your performance reviews. Are they too focused on short term results? Are you incentivizing employee engagement through acquisition of new skills and knowledge or tolerating stasis in an attempt to achieve employee satisfaction? How are you making development transparent so that employees can look ahead to greater leadership positions and work to achieve the skills and results that will help them, and the company, grow? How are you supporting your employees with feedback, coaching, and mentoring to achieve better results faster without burning people out or creating conflict? How are you creating a transparent pathway to bonuses, choice development opportunities, and ultimately promotions? Reconsider what you evaluate for and consider a scorecard that is more balanced between technical skills and results, and softer skills including leadership and personal learning. Find tools to measure learning and get feedback from others regarding leadership skills like inspiration and motivation, and emotional intelligence skills like conflict management, team building, and networking. These are all good ways to bring your long-term strategies into your organizational operations and culture.
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