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Jo Geraghty

Director

Taking ownership

Date added: 30th Jul 2015
Category: Organisational Culture Change

It is up to organisational leaders to take a good look at their strategy and culture and to ask themselves whether it is still fit for purpose in a world which is increasingly turning its back on short-termism and towards a more interactive and collaborative future.

Who owns a company? That was a question asked by the Bank of England’s chief economist Andrew Haldane in a speech given at the University of Edinburgh corporate finance conference in May and released on the Bank of England website this week. It’s also a question which is exercising financial minds across the globe; even being asked by Hillary Clinton as part of her US presidential campaign.

Now we’re not talking here about the register of beneficial owners which comes into force in 2016, although undoubtedly this has added to the debate, nor are we talking simplistically about shareholders as owners. The debate, as Andrew Haldane highlighted, raises “deep and far-reaching questions about the purpose and structure of today’s companies.” In fact Mr Haldane’s speech should be required reading for all those studying finance or economics; covering as it does a brief history of company formation, shareholder rights and primacy, and corporate governance.

In his conclusion, Andrew Haldane comments that challenges to the shareholder centric company model are rising and that “it may be time for a more fundamental re-rooting of company law if we are to tackle these problems at source.” However, there was one other aspect of his speech which caught our attention. That was when he talked about companies and society, examining the impact which organisations can have beyond their immediate sphere. In this, he raised the important point that companies whose objectives are shareholder centric are less likely to consider the wider societal implications in their decision-making; leading to a disconnect between company and societal incentives.

This leads straight to the heart of organisational culture. Driven by increased globalisation and the changing aspirations of the millennial generation, organisations are increasingly looking towards a new way of interacting with the wider world. This is leading some to move away from institutionalised hierarchy and towards a culture of innovation which sets collaboration at the heart of the business model.

When the web has created a level playing field in terms of technology and marketing, organisations have to find new ways of differentiating themselves from the rest of the field. When tomorrow’s disruptors may not even been in existence today, organisations which do not constantly seek to create game changing and market leading products may be overwhelmed before they even know that a threat exists. And when Generation Z expects to play a large part in the development of products and services within organisations which have a social conscience, then businesses have to move away from the pure ‘develop product, sell product’ mentality of the past.

In essence, organisations can no longer afford to operate in isolation. Moreover, the short-term profit at the expense of long-term gain mentality which has seen organisations through for many decades no longer resonates with today’s market. Investors are looking for agile organisations which will not fall prey to changes in technology or other external disruptors. Employees are looking to work in organisations which deliver products and services in an ethical and meaningful way. And customers are looking to work with organisations to create solutions which will meet their aspirations. All of this means that organisations have to move away from profits focused isolation and towards a model which embraces collaboration, agility and game changing levels of customer interaction.

As the movement towards interactive innovation grows, there may well be a need to revisit company law in order to reflect the changing realities of effective company ownership. After all, when an organisation is collaborating with customers, with suppliers, with other third parties and even with competitors in order to deliver market leading products; regulations surrounding corporate governance and the aims and objectives of companies may need to be tweaked. But before any of that comes into play, it is up to organisational leaders to take a good look at their strategy and culture and to ask themselves whether it is still fit for purpose in a world which is increasingly turning its back on short-termism and towards a more interactive and collaborative future.

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