Episode 4: Company Health Beyond Profit

Discussion Series, Episode 4: youdo talks about all things company culture

Luke - Mark good afternoon. Could you start off by telling us a little bit about Manchester Square Partners?

Mark - Our job is to support senior executives at significant inflection points in their careers. We advise individuals in situations where they might be becoming first time chief executives, or first time C suite executives. We help them to understand the changing dynamic in that world, which is very different because they've got an entirely different scale of responsibility. Quite often, those individuals don't really have the opportunity to talk to others around them that have seen it before. As partners we have seen it before, both in terms of our own sets of experience, and having learned by osmosis from leaders from incredibly eclectic walks of life.

Luke - Can you give us some examples of the types of individuals and organisations that you work with?

Mark - We work with senior partners from private practice firms; management consultants, law firms, the big four accountancy firms. We work with Chief Executives from FTSE 100 and FTSE 250 businesses and with CEOs from private equity businesses and charities. And we work with people from Whitehall and government. We also do a lot of work with individuals who are thinking about what the next phase of their professional life might look like. We help people to understand how they can ensure that they are aligning what they're really interested in in life and their sense of purpose, with their experience and their capabilities. And in an environment in which they know they can be happy, successful and fulfilled, working with people that they know that they will respect, learn from, and enjoy being with. And in all of that, making a significant contribution or impact to whatever business it is that they choose, whilst having a real eye to their own wellbeing, their own sense of self, their own financial aspirations and personal goals, and ensuring that they find that sense of ease and that balance in their life. We work with some fascinating people, and we help them understand what they're good at, what they're interested in, what pays them and what ultimately is sustainable.

Luke - One of the things that really resonated with me was when you mentioned the amount of time and energy that you spend ensuring the right fit between the person that you're working with, and what the company and role that they may be going on to do. I tend to think of this as the cultural fit between individuals and the companies they work at. Has this always been so important?

Mark - I think the reality is that fit has always been fundamental. The single biggest reason for executive failure is lack of fit. How you define fit is key and I think people are beginning to understand why it’s so important. That’s why you see a much heavier emphasis on the assessment than perhaps you did in the past, with much of that assessment being driven by psychology. So yes, it's definitely important and of growing importance.

When you talk to people about what sort of individual they might like to have to lead their business, they will say that fundamentally the first and most important element is their ability to manage relationships effectively. Relationships with their board, relationships with their executive team, relationship with key stakeholders, internal and external, and relationships with their own team. Because if people have the ability to build and maintain strong relationships, and a good understanding of business generally, and they put around them people who are excellent at their jobs, whether that be a finance director, whether that be a group HRD, whether that be a head of technology, then the person in the hot seat at the middle has the levers of expertise that he or she can pull appropriately. But ultimately it comes down to our ability to build and develop relationships, which to your point, is really about fit.

But fit doesn't mean sameness. Fit means does this individual have the values and the characteristics to allow them to align in this particular business in a way which is constructive and in a way in which is supportive. So at the very heart of all this, it comes down to whether he or she shares the values of the business that they are about to join. The other way around, the candidates will be looking to see whether those businesses that they have been offered the opportunity to share their values. And that's why things like Team facilitation actually become incredibly important because it's about an understanding of people's values. And they may differ in some areas. That doesn't necessarily mean that they're good or bad or right or wrong. It's just the ability to understand the person that you are interacting with, and how you're likely to react to a situation in good times and bad times. And how he or she is going to react to the same situation in good times or bad times might be polar opposite. But understanding that those reactions are going to be different. And understanding how you can work alongside somebody who has a different perspective. Diversity of thought will be a fundamental reason behind the success or failure of an executive team.

Luke - We’ve done some research recently in which we surveyed around 2000 people in the UK in employment. 88% of them said that it was very important to them to work for a business that had a purpose. What is that you mean when you use the word purpose? And can you give us a bit of perspective on the different types of purpose that you encounter?

Mark - I think it means very different things to different people. The first question about purpose is ‘why is it important’? I think we all recognise that many people see purpose as one of the core drivers of their decision to join and to stay inside business. The second question is, what does being a purpose-led business actually involve? What is a purpose-led business to you might not be a purpose-led business to me. So it's important to be able to define that purpose for the particular business that these individuals are engaged in. And then the key thing is to ensure that whatever that purpose is, it's a purpose which is fully embraced, and not simply a set of values stuck on a wall, which is what you see a lot, and why it's so easy to dismiss purpose, where it is simply a question of talking a big game, rather than acting with real purpose at your core.

That requires getting the buy in for purpose at board level, or getting the buy in at executive level, and then living that purpose through the organisation. So people will understand what that enterprise is actually about.And that takes a lot of hard work and a lot of time, And it requires everybody to speak the same language. Where businesses have successfully achieved those things, then you tend to find that they attract talent and they retain talent. They look after their people more effectively.

What you have now is a lot of people talking about purpose, talking about its importance in the broader context of ESG. But when the markets hit the buffers, as they have done of late, the follow up question is, tell me about the numbers. Tell me about where we're at with our debt. How are we thinking about future investment? Do we have the ability to do what we said we would do on our five year strategic plan. And the executives in this scenario are being pulled in a million different directions, they're being asked to produce value for their shareholders, always. That's what they are paid to do. That's where their core accountability lies. And at the same time, they're being asked to manage a purpose-led business.

You can reasonably argue that purpose and profit should stand comfortably together and in many circumstances they have, but that will not always be the case. Some compromises have to be made. I think it's a very uncomfortable position for some executives to find themselves in because there are very real, competing pressures from analysts and shareholders. If you go to an AGM of a FTSE 100 PLC and you listen to the banking analysts asking questions of the finance director, asking questions about short, medium and long term plans, asking the questions about their EBITDA, etc. So there are these competing pressures. But the fact that it can be difficult in those circumstances, does not take away from the fact that it's something that is terribly important, and here to stay. And over the course of the last 15-20 years, it has increasingly become more important. And that's why you see the advent of B Corp type businesses, etc. Every CEO should be fully aware of what their business can do for their suppliers, for their consumers, for their employees, and ultimately for society. Having a handle on those things and being clear about what they are is both enormously helpful and a strategic advantage.

Luke - Do you see a future where purpose and profit can live more comfortably together?

Mark - So do I see a world in which they can peacefully coexist? Yes, I do. And I think we are moving towards that scenario, but it will be very different for every company, and it will take some enlightened CEOs, CIOs to lead. It's actually what good leadership is about. But I think there will always be a pressure on an analyst to think about the shareholder value. I think the real question is, at what point do the shareholders think that it's more important to produce a product that is sustainable for the future, and ethically sourced and so on, than it is for them to have a return on their investment. And there are a lot of people in that chain. So you have pressure on the board, you have pressure on the executive, you have pressure on the shareholders.

But we are still in a world in which making money is not a bad thing. And I think there is a danger that we can over index, not on the importance of purpose, you can never over index on that. But you can over index on profit versus purpose. Because if you get profit, right, and you build a business which is sustainable, but which also supports its suppliers, supports its customers, supports its shareholders and supports its employees, then everybody can see the benefit of that. I think the danger is where it's a trade off between one faction of stakeholder against another. Where that exists, I strongly suspect that the financials will win out.

This is also where business bashing is such a bad thing. There is a real opportunity to make society a more comfortable place, if business thrives in a socially responsible way. Because they then have more money in the system. And if there is more money in the system, there's hopefully more money in people's pockets and they spend and that creates growth, and people are more comfortable, and they're more excited about the future. And so I think we need to be super careful, because if we over index, if we bash business too hard, then business may end up like politics. You wouldn’t want to be an MP today. Why? Because the scrutiny is so extensive, that you can't afford any mistakes. And at the end of the day, your ability to make a real impact is compromised significantly by party politics and media intrusion. I think if we're not careful, the same will be true about really high quality CEOs. I do think there's something about the really significant pressure that is put on senior execs and the expectations of them to produce at every level for all of the stakeholders, including the profit related one and the purpose related ones, that is not terribly sustainable. We need to have very good people in business and we need to have very good people in politics. And I think at the moment that constant intrusion on their lives and heavy expectation is counterproductive.

Luke - It seems to me that a lot of this is driven by the quick fix world we live in, and the speed with which people want results. Given the requirement to manage this very complex set of stakeholders, and to manage both profit and purpose, does a modern CEO need a different skill set or even a different resume?

Mark - I think that CEOs need to add a real understanding of ESG (broadly defined). I think the good news is that you are seeing that already. I think it would be a very unlikely appointment in today's world, where a CEO was put into a job where a business had fundamental responsibilities to its consumer base or society, and where that CEO had either zero track record or zero interest in ESG-related matters. People are much more emotionally intelligent than they were in the past. And I think leadership is essentially moving towards the more thoughtful polymath who understands geopolitical scenarios as much as they understand economics. And those individuals understand the importance of a happy and productive workforce. And one of the levers that you can pull in that regard, is the ability to talk to that workforce about the good that they are doing, for their business, for themselves, for their family, and for society. And that means you need to look after them. And you need to provide them with opportunity. And any CEO worth their salt in today's world needs to understand that.

But they also need to understand strategy. They need to understand basic economics, they need to understand the competitive landscape in which they operate. They need to understand business models, they need to understand transition and change. So there are a whole load of elements that fall into a CEO toolkit. And I think increasingly their ability to manage people well, in an emotionally intelligent way, is very often the key to their success. Look at some of the great business stories of inspirational leaders - they’ve turned a workforce that was slightly jaundiced and given them a star that they can follow, which they are excited about, and which they want to help their CEO deliver. And where that happens, you see wonderful success.

You see it in sport, right? You see it with Brendan McCullum in cricket. A complete change, driven by the appointment of Rob Key and Andrew Strauss. These are really big, bold appointments and, they could have gone horribly wrong. But the reason that's gone very well is because everybody in that England dressing room has a new sense of purpose. And when I talk about purpose, that purpose might be a winning purpose in the England dressing room as much as a purpose of saving the planet. So that's when it goes back to the conversation about purpose. But what you absolutely need is your people, your workforce, buying into and living the purpose of the business in order for it to be successful. And you'll see it in startups as much as you'll see it in FTSE 100 businesses. Small successful startups have people around them who are prepared to work for nothing, to work incredibly hard and not be paid for years. Why? Because they believe in the end product, because they believe that ultimately they will be successful, and they're prepared to put in the hard yards for future reward.

Back to your question about purpose, it’s important because you need to have people who believe the story, the narrative and the narrative needs to be readily comprehensible. And it needs to be compelling. It needs to be appropriately concise. And ultimately, it needs to be something that the people in that business can get behind. So they know their direction of travel, and they are really ready to walk over hot coals for that. So how you define that purpose is fundamentally the most important thing.

Luke - Switching tracks, is the topic of hybrid working or remote working something that comes up as a topic in the discussions that you're having? And kind of how high up the priority list is it?

Mark - Very regularly is the short answer, because most of the people that we work with are leading businesses. And this is one of their key questions. People are engaged by the idea that individuals have more autonomy over their working life. I don't believe that they are engaged in it to the extent that they feel that should mean total flexibility. Because if you give individuals total flexibility, then by definition, some people at the end of one individual's flexibility have to deal with that problem, and it becomes inflexible for another.

So you have a difficult situation where there is no way that one rule is going to be comfortable for everybody. I think finding the balance in business is absolutely key. The fundamental issue is how do the younger generation learn the tricks of the trade? How do they get back to being in the room? How do you get back to being exposed to and listening to conversations that you are a part of, but if it is on zoom conversation you wouldn't be included? So I think you will find people more inclined to reverse back into a four day a week in the office or something along those lines. The argument that you need to be in the office more than you are at home, which therefore means people spend three days in the office is fine but with an obvious caveat. If you have three days in the office everyone will decide that they want to be at home on Monday and Friday, And then you've got a property utilisation problem with businesses spending huge amounts of money on rent. And ultimately, that's not long term sustainable, which has a long term effect on the property industry. So I think you need to be a bit careful about it.

Certainly my daughter's age-group would say that finding the balance is super important. And I think enlightened CEOs will help their people find that balance. But my guess is, that over time, it will be towards the office, not least because I think the pressures of working at home are arguably much worse for your well being than being at the office where at the end of the day you can walk out and go home and go to the gym or the pub for a pint. We all need delineation in our life. If we're at home permanently working then there isn't much delineation, and it can put pressure on families and relationships.

Luke - There is data that shows that the Millennial and Gen Z age groups have different, higher, expectations of their employers than previous generations. the sort of company that they work for. Do you believe that modern executives understand and can work with that level of expectation?

Mark - People undoubtedly have a different expectation of their employer than they did 20 or 30 years ago. And I think that is a very good thing. I think it is important that the younger generation, however defined, conclude that they want to go to work, not necessarily that they have to go to work. They want to go to work in an environment where they are comfortable, and where they feel a keen interest in the subject matter. Working alongside people that they like and respect. That to my mind is a really significant and an important shift. But a good one. I absolutely also think that senior management and HR and talent management and CEOs recognise that the choices are much more in the hands of the employee than the employer. It's a competitive world out there. All of which is a good thing.

That said, I think it will be really interesting to see how it all plays out. I don't think we have the answers yet as to how that might finally land. For those who don't want to spend as much time in the office, for those who insist on loving every minute of their work, all of which are very noble endeavours, there will be a trade off, there will be a compromise. Our parents, and grandparents, lived life in a way that was different. They didn't have the optionality of whether they wanted to be at work three days a week. They chose to do something because it enabled them to make money that allowed them to do the things that they wanted to do; buy houses, pay off their mortgages, go on holidays etc.

All of those sorts of things are a function of many people in many generations, working incredibly hard, even if they didn't love every minute of it. I think nowadays there is a greater propensity for people to say that what's really important is happiness, and wellbeing, and a sense of ease. And I think that is a really good thing. But I think this will have some consequences that people are not yet appreciative of. There isn't a right or a wrong, and I would absolutely back any of my children to do whatever they wanted to do. I think at the moment, though, that there is not yet a generational appreciation of what that means in the future.

Luke - Mark thank you.