Thinking Long-Term When Your Shareholders Won’t Let You

By MaryLee Sachs, US CEO, Brandpie

In a recent study of nearly 700 CEOs across the US and Europe, my team at Brandpie uncovered that 76% of chief executives think corporations need to shift focus from short-term profit delivery to long-term value creation.

So why have less than 5% actually made that shift?

Uncertainty about the future, and how to navigate increasing pressure from shareholders to survive the present moment can make the shift from short-term profit to long-term value feel like a pipe dream. And that makes sense, even more now than it did when we administered the survey before the COVID-19 pandemic had taken root.

But even amidst the most uncertain period of history in many of our lifetimes, and certainly the most uncertain business landscape, the transition is possible. If they can be bold enough, those CEOs who have identified the need to shift toward long-term value can join that 5% of leaders who have already taken the leap.

All they need is purpose.

But I’m not talking about surface-level mission statements or even commitments to meeting ESG requirements.

CEOs that are ready to successfully pursue long-term value creation need something much deeper: a north star that guides businesses from the inside out. A purpose that primes them, through long-term considerations, to respond quickly and effectively to short-term concerns to benefit share and stakeholders – including staff and brand audience – across the board.

A north star

The most common barrier to leaders looking to make a long-term impact is uncertainty, and the world is increasingly rife with it.

Businesses must find a way to offer some sense of security, to shareholders and stakeholders – and purpose is the path to that security.

Organizations that have orientated themselves around a north star internally and externally are better able to address, respond to, and pivot in the face of unexpected events and the endless changing market landscape.

Take a company like BlackRock – whose CEO Larry Fink has been a long-time advocate of purpose, calling it “the animating force” for achieving profit. When I spoke to Frank Cooper, BlackRock’s Senior Managing Director and Global CMO in a webinar this summer, he reiterated the organization’s dedication to their guiding purpose, and discussed how it helped them adapt to support their employees and their stakeholders when COVID-19 threatened financial security around the world.

“In the past six months, the COVID-19 crisis, alongside racial justice movements, have drastically changed the ways people expect corporations and corporate leaders to act,” said Cooper. Initially BlackRock prioritized a humanitarian response for the short term – focusing on guaranteeing as much security for their employees, customers, and shareholders as possible. But as part of a purpose-driven leadership team, Frank knew that short-term reactionary methods wouldn’t be enough.

“If you only play defense,” he said, “You will not end up winning. You have to play defense and offence.” And purpose is the game plan that allows you to do that.

Blurred lines

BlackRock’s Fink was also one of 181 CEOs to sign a statement from the Business Roundtable last year, which redefined the purpose of corporations in light of changing business landscapes and an increased focus on stakeholders. The statement also expresses a commitment to prioritizing long-term value to the benefit of shareholders, serving as a reminder that long-term value creation and pleasing shareholders is not remotely mutually exclusive.

That Business Roundtable statement generated a lot of buzz about the rise of stakeholder capitalism, and for good reason. Increasingly, stakeholders are playing a more powerful role in the success of businesses than ever before. And that’s as it should be. Afterall, a company’s worth is only as good as the end service it delivers to meet customers’ needs, and when it comes to employees, they’re the best ambassadors for the business.

Both of these demographics are looking for long-term relationships, security, and to succeed in the long-term, businesses have to find a way to offer that now, or risk losing hold of customers and employees that are crucial to their success in the present moment.

Another rising trend that represents a blurring of the lines between share and stakeholder interests is a new wave of shareholder activism. Rather than advocating for strictly profit driven-changes, firms like Trian Partners and Blue Harbour are investing in order to steer companies towards higher ESG standards, reflecting a more purposeful approach to doing business with not just the future of a company, but the future of the world in mind.

Pivoting with purpose

As the COVID-19 crisis continues to throw uncertainty after uncertainty in the face of leaders fighting to keep business as usual as it can possibly be, purpose has proven to be a life-saving tool. It’s allowed many organizations to pivot authentically and smoothly to meet unprecedented internal and external needs.

To survive in any context, businesses constantly need to react to changing conversations to meet stakeholder needs, but the pandemic certainly underscores just how effectively a purpose can ferry organizations through short-term change toward more permanent and relevant adjustments. These uncertain times have also challenged businesses to recognize that purpose incorporates more than just something to stand for, but a way of acting, and focussing on service and fulfilment of need.

In the early days of the pandemic, companies like BrewDog, Ford, and Virgin Orbit stood out for their swift and apparently seamless transition to providing hand sanitizer, PPE, and respirators. Purpose played no uncertain part in these agile short-term pivots – by knowing who they are at a core level, and how their specific expertise positions them to respond to the evolving needs of their customers, they were able to quickly adapt to new, entirely unexpected needs for the greater good. They were driven by clear purpose internally that allowed for authentic outward change.

Playing the long game

True purpose is achieved through constant maintenance and centering – moving forward purpose must become part of corporate hygiene. The current state of business – and the world at large – demands that shareholders get on board with the value of that.

None of us have a crystal ball to determine what will happen. When you think about all the different things affecting the market – a pandemic, Black Lives Matter, equality, ESG – it’s hard to imagine how to prepare your business for any number of continually unexpected factors, while also priming it to last.

But a deeply-rooted purpose addresses both of these problems. By determining the long-term value your company can offer and implementing that internally, you create a resilient operation that knows what it stands for, how it operates, and is prepared to nimbly shift in the face of adversity.

No new normal will ever last, but businesses with a strong sense of internal self and clear, purposeful organization can.