 PLENARY SESSION Sustaining Corporate Loyalty FRIDAY 12 OCTOBER 2007
Loyalty, as this debate showed in no uncertain terms, is a big, big issue for today’s companies. It touches on practically all areas of a firm’s activities. In particular, loyalty comes into play in human resources departments, where companies must do all they can to keep talented staff in an increasingly cut-throat recruitment market. But it also has a major impact on the most crucial relationship that affects any firm: the relationship a company has with its customers. Without loyal customers, firms would quite simply find it very hard to survive, participants heard. After some highly thought-provoking exchanges on ‘touchy feely’ reasons why it would be a good idea for companies to project a more caring, socially responsible image both to their employees and to the communities where they have their operations, Mercedes Erra, Managing Director of Havas, cut to the chase. Citing the famous case of the Nike sportswear company’s one-time woes over working conditions in some of its factories, Erra said: “If people think a company is behaving badly they buy less of its products and it makes less cash.” In other words, loyalty has a direct impact on the one thing that no self-respecting senior manager can afford to take his or her eyes off for a second: the bottom line. Erra presented a report by her firm that showed consumers are increasingly asking for products that reflect their ideals and aspirations. The survey, carried out in the UK, France and the USA, showed that between 80 and 86 percent of people questioned said that companies should stand for other things than just making profits. “We are living at a time of extraordinary change,” argued Erra. “When someone buys a product today, they are also buying a little bit of a certain lifestyle, perhaps a little bit of morality,” she said. Firms would ignore this new reality at their peril, she added. Within companies senior management will have to deal with more and more ethical and vision- related questions if they want to recruit and retain top employees, participants argued. Young potential employees, the so-called ‘Generation Y’, was particularly picky in this regard, suggested Lynda Gratton, a Professor at the London Business School. “Generation Y are choosing an organisation on the basis of alignment between their value sets and the values of the company,” she said. Young job seekers are no longer content with the prospect of earning a decent salary. They want their job to mean something as well, she suggested. As far as Gratton was concerned, companies should welcome this new reality rather than feel threatened by it. Michel Landel, the CEO of catering giant Sodexho, which employs 345,000 people around the world, said his firm strongly believed in the need to support worthy causes. Sodexho is currently supporting a campaign to combat malnutrition in the USA. Perhaps surprisingly, the richest country in the world, which is also afflicted by a well-publicised obesity epidemic, currently has 30 million under-nourished citizens. “Companies are not just there to make money but also to give back to the community,” Landel said. He added that such schemes helped his firm develop a positive image in the eyes of both its customers and its employees. Frank Brown, of internationally renowned business school INSEAD, sounded a warning note, however. He suggested that too much focus on socially enlightened issues not directly linked to a firm’s core business could end up riling a company’s most senior managers. “You can focus on things like corporate social responsibility but the fundamental objectives of a company can be at odds with those kinds of goals,” he cautioned. Another issue raised during the debate was the question of executive pay. As long as top managers continued to receive pay and bonus packages that were hugely in excess of an average employee’s remuneration, building a feeling of loyalty and solidarity within organizations would remain an uphill task. Brown argued that clearer common rules, agreed upon by the business community as a whole, were needed when it came to executive pay and perks packages. “Until we get some standards and good reporting around compensation, we’re going to have a problem,” he said. Gerald Lema of Baxter International healthcare agreed on this need for reliable data. “You only get things done that are measured,” he said. _______________________ |