After nearly four years as CEO of accountancy firm Grant Thornton, Sacha Romanovitch—one of the first senior female leaders in a major professional services organisation—is to step down and will not run for a second term.
While feted in the media and with other professionals for her efforts to drive the firm towards operating with a “social purpose”, including a shared enterprise model, it would seem that Grant Thornton’s governing board, at least, has other ideas of the near-term direction.
“Following discussions with Sacha, the board has agreed that a new CEO is the logical next step to create long-term sustainable profits for the firm,” stated partnership oversight board chair Ed Warner.
The firm’s direction of travel indicates that implementing a socially driven organisation clashed with its drive to make money for its partners. But is it that simple? And is marrying the two possible anyway?
A recent report by Boston Consulting Group (BCG), Total Societal Impact: A New Lens for Strategy, states that investors are increasingly focused on environmental, social and governance issues. It also found that those taking societal impact into account when setting strategy, or adjusting their business model, open up “valuable new opportunities…thus likely increasing corporate longevity”.
For Doug Beal, a director in BCG’s societal impact practice group, CSR and environmental programmes are unfortunately often still run parallel to an organisation, rather than embedded into the core.
“It is unfortunately still seen as a side event,” said Beal. “But the closer you can really identify the core capabilities and opportunities and services to create a positive impact, the more you can do and the more you’ll get positive financial returns.
“Those that see it as charity and ‘done on the side’, you won’t get the benefits.”
But making change requires investment, which can potentially impact profits in the near-term.
Fundamentally, many corporate leaders have a “short-termist” attitude towards business, acting as “share traders” rather than investors, said David Grayson, emeritus professor of corporate responsibility at Cranfield School of Management.
“If you want to have a fighting chance of existing in the future, you need to think very carefully about your purpose,” added Grayson.
He argues that setting out a societal purpose requires a statement that’s “inspiring, authentic, but creates value for itself and society”.
Consumers can take a longer time to turn around from a product or service that is perceived as lacking social purpose, but such behaviour will impact on employee engagement and the recruitment and retention of talent.
“Consumers will be less of a factor until later on, compared to other pressures such as employees,” said Grayson. “While there is evidence of the interest of consumers have about the company behind the brand—that will be a longer burn.”
“But we should be much more concerned with optimising profitability over the medium to long-term, so [we] have to take into account the needs of other stakeholders such as employees and suppliers—who effectively give you a licence to operate.”
BCG’s Beal concludes by raising the thorny topic of change management. Changing the business to have a positive social impact means disruption. Parties need to be engaged and enthusiastic about change, and a proper project must be in place.
“There needs to be an operating model put in place, a central team needs to be an enabler and a centre of excellence that interfaces with the business units, and then with IR, marketing and the finance function,” said Beal.
The board must hold its business leaders to account, he added, to get them to come up with ideas to drive the business forward, but also adjust their product and services from a societal point of view.
New KPIs are also needed to gauge success: “Running a business is about taking some chances,” Beal said.