The University of California at Davis just published the results of a survey that demonstrate so much common sense it’s shocking. They found that, “Companies who pay attention to expenditures all the time, rather than just when an economic crisis hits, have a lot less trouble during the downturn.”
The Responsible Business has a built-in process whereby teams work on financial effectiveness goals and principles in every initiative and activity. This has the effect of preventing a business from being caught off guard. For example, when Colgate, South Africa sets up teams for specific buyer nodes (e.g. big box or mom-and-pop channels), they report the impact of activities in terms of effects on earnings, margins, and cash flow—Colgate’s and the stores’. In the Responsible Business, this kind of whole-systems understanding that includes all stakeholders, starting with customers, is shared by everyone, from operators on the manufacturing line to chief financial officer.
In addition, in a Responsible Business each and every employee has created their own Personal Development Plan, which includes a “promise beyond ableness.” This is a commitment made by the employee to take on a needed improvement for their buyer node and to calculate and report on its success in terms of improvement in the life of the customer as well as the earnings, margins, and cash flow return to the business. At Colgate, promises beyond ableness were made by each person who sp0nsored a new sales channel, often employees who were not part of the sales team. This was during the period just prior and after the first free elections in South Africa, a time when Colgate’s business was growing while other companies were struggling.
When financial effectiveness and personal development are on-going practice, then there can be very little waste. More importantly, they make it possible to move out of the trap cycles that inevitably occur in all economies and all markets. Business leaders too often forget that they need to build in the flexibility to move up and down smoothly as economic cycles change.
There are many more stories like Colgate’s, with descriptions of how responsibility creates fiscal sustainability, in my new book, The Responsible Business: Reimagining Sustainability and Success.