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The ROI of Good Business

Filed in Business Strategy

Kevin Smith

Kevin brings clarity to business strategy and objectivity to brand development for RP clients. He got his start as an account executive with us in 1994, then landed in Manhattan at Shepardson Stern and Kaminsky, where he worked on brand strategy for accounts such Southern Company and Road Runner. He then went on to J. Walter Thompson and helped to launch Merrill Lynch’s online trading product. In 2004, Kevin returned to his home state and home agency as a partner.

Molding a Responsible Brand is about so much more than just creating a feel-good culture. Categorical investments in a company’s purpose, employees and social footprint facilitate a shared sense of purpose and strategic direction. Strong leaders know that when stewarded appropriately, these brand investments produce bottom-line ROI. It really is, quite simply, good business.

Here’s a look at how these three key investments build Responsible Brands AND the bottom line.

Purpose Investment

The numbers don’t lie. Abundant research shows purpose-driven companies have the potential to generate competitive value and achieve a higher level of financial performance. They make more money, have more engaged employees and more loyal customers, and are better at innovation and transformational change.

A study published by EY Beacon Institute and Harvard Business Review reported 58 percent of companies with a clearly articulated and understood purpose experienced growth of +10 percent versus 42 percent of companies not prioritizing their purpose.1 And, even more eye-opening, according to a 2016 report by Price Waterhouse Coopers, companies that are highly purpose-driven outperform those that aren’t by as much as 400 percent.2 Need we say more?

Interestingly, while the vast majority of executives believe a shared sense of purpose in the workplace matters, and that it can affect an organization’s ability to achieve transformational change and growth, only a minority of executives actually run their organization in a purpose-driven way. Leaders must overcome the common barriers to action – identified as poor communication from top leadership, short-term shareholder pressure that hinders long-term value creation, and infrastructure that is misaligned with purpose1 – and invest the time and money needed to embed purpose throughout their organization. It’s a proven way to thrive.

79% of business leaders believe purpose is central to business success, but only 34% use purpose as a guidepost for decision making of their leadership team.2

Employee Investment

People will leave you. With low unemployment and high demand for educated, talented workers, ours is an employee-driven marketplace. The price tag of voluntary employee turnover in the U.S. is a staggering $536 billion,3 and the ManpowerGroup estimates the cost to replace one employee is 21 percent of his salary (excepting physicians and executives).4 Not keeping folks happy is expensive.

Employers who do not intentionally invest in designing workplaces that are fulfilling and beneficial will suffer from increased turnover costs. Purpose-driven work environments that focus on prevention strategies – like recruiting, vetting, onboarding, career development, engagement, management behavior, work-life balance, and more – will keep turnover in check. (This is assuming, of course, salaries and benefits packages are competitive.)

Top reasons employees leave a company:3

> Career Development (22%)
> Work-Life Balance (12%)
> Management Behavior (11%)
> Compensation and Benefits (9%)

Furthermore, enthusiastic employees make productive employees, creating a virtuous cycle for the company’s investments and its competitive advantage. They want to be part of something great; they want to belong to something and work alongside like-minded individuals whom they enjoy, trust and respect. But it’s more than just creating a positive cultural environment; high performers deliver up to 400 percent more than their mediocre counterparts.5 So, it becomes about protecting against the serious cost threat that wasted talent poses to the bottom line.

Not to mention, according to a 2015 study by Imperative and LinkedIn, 64 percent of purpose-oriented people have higher levels of fulfillment with their work than non-purpose-oriented people.6 Like attracts like. Purpose-driven people are attracted to purpose-driven work environments.

Social Investment

Stand for something. Social investment — commonly referred to as community investment — is the voluntary contribution companies make to support the well-being of communities, individuals and the world. Social investment can mean monetary grants to accredited nonprofit organizations; employee volunteering programs; in-kind grants of products, services, technology or physical assets; and partnerships formed to address specific societal challenges or conditions.

Companies that optimize their approach to social investment do that by aligning the program with their organizational health, business strategy and brand marketing. These companies have recorded significant returns:

  • Up to a 6 percent boost in share price
  • 20 percent increase in sales
  • 13 percent jump in productivity
  • 50 percent decrease in employee turnover
  • A boost to reputation worth up to 11 percent of a company’s market cap.7

Real world examples illustrate just how significant these financial gains can be. Unilever indicates the adoption of its Sustainable Living Plan drove a 26 percent increase in sales from 2009-2012, with many specific product gains attributed to integrating social investment and marketing. IBM cited a $600 million return on a $200 million investment for its social investment program, the Corporate Service Corps. With results like these, how can strong business leaders not give serious consideration to corporate citizenship?

These three investments are critical in building a brand that knows what it stands for and what it stands against. Since 78 percent of Americans believe companies must do more than just make money – that they must positively impact society as well8 – aligning these types of intentional investments is a proven competitive factor in today’s marketplace.

Given that 75 percent of us expect brands to make more of a contribution to our wellbeing and quality of life — while only 40 percent of us believe brands are doing so —9 there’s a huge opportunity gap out there for organizations willing to differentiate themselves by investing in good business.

1 “The Business Case for Purpose,” EY Beacon Institute and Harvard Business Review Analytic Services, 2015
2 “Putting Purpose to Work,” Price Waterhouse Coopers, 2016
32017 Retention Report: Trends, Reasons & Recommendations,” Work Institute, 2017
42016/2017 Talent Shortage Survey,” ManpowerGroup, 2017
5 “Employee Retention: The True Cost of Losing Your Best Talent,” Wrike (Emily Bonnie), 2017
62016 Global Report, Purpose at Work,” Imperative and LinkedIn, 2016
7 “Business ROI of Social Investments,” IO Sustainability and ACCP, 2018
8 2018 Purpose Study, CONE/Porter Novelli, 2018
9 “2017 Meaningful Brands” Global Analysis, Havas Media, 2017

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