By Brian McKay
So you say you want your company to zenrupt? That’s awesome. Done properly your company can disrupt and turn the staid big boys on their head. Your company can innovate, find the forgotten and make them profitable and run operationally perfect, but you can never truly achieve and be a zenruptor without being socially responsible.
There used to be this thing called stakeholder theory. Do you remember it? It said that companies had an obligation to owners, employees and communities in equal amounts. Companies that used stakeholder theory took a long term view that centered around value creation. Then, all of a sudden, this thing called short-termism took over as owners started demanding quarterly returns. Gone were the days of true long term growth and here were the days of mergers and acquisitions as the new growth formula. The socially responsible companies became a rarity.
It seems that many companies still claim to be socially responsible, but are they? Is it just marketing? If they truly were, would their employees be seeing their wages go backward and would they be settling major lawsuits in order to avoid admitting fault? Giving to a charity and pointing to it as a sign of how much you care doesn't matter if you prove to be a hypocrite elsewhere. If that is the case, it is truly just marketing.
A zenruptive company truly believes in and practices stakeholder theory daily. Why? Because the essence of disruption comes from social purpose and true value creation. A company cannot find the neglected customers and create long term value if they are solely focused on the easy short term profits that drive their adversaries. Behave like the big boys and you'll be just like them.
Socially responsible companies have consistently shown better long term growth, than companies that simply cater to quarterly results. Socially responsible companies have delivered a return to investors of 10.46% annually since 1990 versus 9.93% for the S&P 500. Costco has been consistently recognized as socially responsible, with well paid employees, excellent support of their Kirkland brand suppliers and organic farmers. They have consistently outgrown Walmart and Target in revenues, despite this socially responsible focus. Granted, Costco maintains fewer skus and more inventory flexibility, but the growth numbers compared to others are immense at an average 8% per year.
Your company is a zenruptive company and certainly small and probably not publicly traded like the bigger firms discussed here, but the strategy is the same. A zenruptive company has a closer connection with its market, its customers and its employees when it maintains a socially responsible mind frame.
A zenruptor company that is socially responsible is also closer to the action as it is run by a need to survey the needs of all stakeholders and not just the owners. Returns aren't just dominated by the income statement, but by being tied to the external forces around it.
Another trait of socially responsible companies is the lack of the rock star CEO. zenruption has consistently been opposed to the companies that have overpaid CEO's and compliant boards as value creators. Creative tension and grounded CEO’s create value at much higher rates than any other model.
Another review of publicly traded companies shows that lower paid CEO’s create long term value to their investors at far higher levels that the rock star CEO's charged with short term performance. How much value? Studies show that the highest paid CEO's return 10 percent less value to their shareholders. CEO's with three years of tenure and boards stacked in their favor have returned 22% less value over that term than lower paid CEO’s with creative tension in their boards.
Essentially, lower paid executives and a socially responsible approach create the most value. It is the ability of connection of a truly humble and responsible firm that creates a true zenruptor.
If you wish to continually be the best at what you do, follow the zenruptive model and stay socially responsible and humble.
Brian McKay is a co-founder of zenruption and has his MBA from Boise State University (yes, the blue field). He strongly believes that value creators and great leaders succumb to humility. Great companies are created with the need to create value across every place the business touches. Tonight he touched a great IPA and created some value in his own special way.
Feature photo courtesy of Flickr, under Creative Commons Attribution-Noncommercial license