PURPOSE, INC.

‍Participants:

Michael Young

Alice Korngold

Show Resources and Links

Korngold Consulting: http://korngoldconsulting.com/

Better World Leadership: http://www.betterworldleadership.com/

Twitter: @alicekorngold

Alice’s Books:

A Better World, Inc.: How Companies Profit by Solving Global Problems…Where Governments Cannot

https://www.amazon.com/Better-World-Inc-Problems-Where-Governments/dp/1137327650

Leveraging Good Will: Strengthening Nonprofits by Engaging Businesses

https://www.amazon.com/Leveraging-Good-Will-Strengthening-Nonprofits/dp/047090755X

Wall Street Journal article on Alice’s work with the Drucker Institute to measure Fortune 250 companies social responsibility.

https://www.wsj.com/articles/the-guru-behind-the-management-top-250-rankings-1512482700

Michael Young:

Welcome to the Purpose, Inc., the podcast where we discuss corporate purpose and stakeholder capitalism. I'm your host, Michael Young.

Can corporations be productive social actors? Can they create good in society while generating profits through sustainable business models? Should we trust them in this pursuit? How should corporations and not-for-profit entities interact in co-create solutions?

My guest today is ideally situated to answer these questions. Alice Korngold is President and CEO of Korngold Consulting, a New York City based group that provides strategy, advisory services for boards and executive teams, for multinational corporations on a range of issues. And she's been consulting and writing about the role of corporations in society for a couple of decades. In fact, she's the author of two books: A Better World, Inc.: How Companies Profit by Solving Global Problems Where Governments Cannot which I've just finished and we talk about in the podcast; also, Leveraging Goodwill: Strengthening Nonprofits by Engaging Business and we talk about the interplay between corporates and nonprofits. Among Alice's many measurement and benchmarking projects, she developed the methodology for the Drucker Institute which ranks Fortune 250 companies based on their alignment with Peter Drucker’s social responsibility principles.

Alice is a leading thinker and consultant on the topic of how global corporations and nonprofits can work together on sustainability, CSR, diversity and inclusion, how to measure and rank corporate sustainability efforts. Alice is a visiting professor at York University in Toronto. She holds a bachelor's and a Master's from the University of Pennsylvania. Alice and I get into a wide-ranging discussion.

We talk about Alice's book which is an authoritative survey of how companies are helping solve global problems through profitable and sustainable business solutions that also benefit individuals and communities.

I ask Alice whether or not we can trust corporations to be stewards of stakeholder interests and sustainability. Her answer surprised me. You'll hear it later in the podcast.

A big focus of Alice's work is matching executives within multinational corporations on not-for-profit boards and we talk about the hugely productive and important benefits that come out of those collaborations for both corporate executives and not-for-profits and NGOs. We talk a lot about COVID and how it will change our views of corporations based on how they are treating their employees now. Gig economy companies will probably come out particularly poorly from this crisis. And Alice is incredibly generous with her time and her insights and she's been very generous to me. I'm incredibly grateful that she came on the podcast. So, without further ado, here's my interview with Alice Korngold. Alice, thank you so much for coming on the podcast.

Alice Korngold:

Michael, thank you so much. I can't think of a better, more important time to have the conversation we're going to have today.

Michael Young:

There's a lot to get into, a lot to talk about, about your work, about your book. But I thought maybe we could just start with some definitions or a definition in how do you think about corporations as players on the global stage of creating sustainability and social impact?

Alice Korngold:

Thank you for the opportunity to talk about this. So, the title of course is A Better World, Inc.: How Companies Profit by Solving Global Problems Where Governments Cannot and based on an analysis of dozens of case studies, what we see is that only companies have the vast resources to truly solve our most challenging problems, social, economic and environmental because companies have the vast human resources, financial technology resources to solve these problems and companies have the global footprints and the market incentives. Now nonprofits often have great solutions and perform powerfully important work but they have more limited resources. I will say that while only companies can truly solve our challenges, they are only successful in finding innovative solutions to our problems if they do three things well: stakeholder engagement, truly understanding the needs and interests of employees, customers and communities, for example; secondly, collaborating with NGOs and nonprofits who bring expertise credibility and relationships with a broader swath of society including remote and vulnerable communities; and third, companies are only successful if there is effective board governance which means a board of directors with people from diverse backgrounds and perspectives who recognize that the company will grow its value by using its greatest assets to find innovative solutions to the greatest challenges facing our communities and our world and that translate to long term value, to profitability.

Michael Young:

Just should add that is the headline of your book, A Better World, Inc. which I've read and thank you for the book. It's fantastic. And you make an excellent and unique point which is that corporations are uniquely capable of solving these problems. How did you arrive at this view?

Alice Korngold:

Wow. That's an amazing question because it was not the assumption that I began with by any means. In fact, that was the revelation in the days before I submitted the manuscript to the publisher. So, I had done dozens of case studies, massive research, loved the journey that that took me through and could see clearly that problem solving and innovation happens when companies collaborate with nonprofits, understand stakeholders have effective board governance. But the truth is someone whom I respect greatly read my manuscript in the days before I submitted it and said well, what's the big, big, big takeaway and I had been so immersed in the research that that was a very powerful question and I was on a driving trip later that day and that's when it hit me. Now you have to understand this is in 2014. So, in the context of that time, that's when it hit me oh my gosh, only companies really have the resources, the global footprint, the market incentives to solve these problems and I did have to check back with a couple of people who know me well to say can I say that. And their response was is that what the research told you? I said yes but I've always had a foot in both the nonprofit and corporate worlds and for me to come out and say that sounded rather radical. But that's what the story told me.

Michael Young:

Great. And the research. So, then my follow-on question, Alice, is can we count on companies to be good stewards of social impact and how can we hold them accountable to those goals?

Alice Korngold:

Can we count on companies as stewards? Absolutely not. Society must hold companies accountable. And now in these past few years, what's changed is investors are beginning to understand that it's in their interest to hold companies accountable. So, we have a number of outstanding organizations who have created measurement methodologies and there is an emphasis on transparency. And in light of the current pandemic, it's becoming very apparent the companies can no longer hide. Greenwashing and putting on a good face isn't going to work anymore. For example, how companies treat their employees in terms of healthcare benefits and paid leave, etc., that those companies are in jeopardy if employees are not treated the way they should be treated.

Michael Young:

That's an excellent point. I don't know if you saw the FT today. There's a piece there, Jim Chanos who's an investor said that—and I want to get into COVID broadly—but said that gig economy companies in particular are going to come out of the pandemic harmed potentially because of how they treat labor and the fact that their entire employment is very precarious and there are no benefits.

Alice Korngold:

Exactly.

Michael Young:

So, a point today on that topic I think and it is to yours an investor saying that, that this ultimately is going to expose who's doing what, when, where. The tide has gone out. We're going to see them swimming naked here.

Alice Korngold:

Exactly. It's also a matter of short term versus long term thinking. So, companies that in the past thought well, this is quick and easy. We pay them very little, we don't provide healthcare we don't provide other benefits and we make more money. Well, what COVID has made very apparent is that only companies that take a long term view, for example, investing in employees will be successful.

Michael Young:

That is such an important point and I think it is central to the sustainability, the ESG frameworks. So, how do you think about holding corporations accountable? What are the measures? What are the methodologies? How should stakeholders—what lens should they look at corporations through?

Alice Korngold:

There are a number of excellent organizations that have measurement approaches. One of their challenges is how to blend them or which measurement approach serves which purpose. But I think the media, nonprofits, other community organizations hold companies accountable as well and the article that you reference in the Financial Times today about the lack of investment in employees, that that's coming back to haunt companies, I think it will become apparent to all of us and obviously that has implications for climate change where people thought well, that's way off. It's not going to affect us. I think we're all now seeing all these issues will affect society profoundly.

Michael Young:

Alice, a big focus of your work is—and I want to move into the nonprofit board matching work that you do with corporations and NGOs and not-for-profits. So, just tee that up for us and let's dive into that because I think that's a very unique and interesting capability and when we were talking about it in preparation for the episode, it was a real eye-opener. So, give us a good survey of that work and why is it important for both parties.

Alice Korngold:

Wonderful. Thank you. As I mentioned to you earlier, this is the first time I’ve had an opportunity to talk about this work in the context of COVID-19 and it's so powerful. So, the premise which is based on the research in my book is that when a company uses its most valuable assets—human, technological, financial—to find innovative solutions to our most vital challenges, social economic, and environmental, a company will really grow its value. The evidence is in the case studies in my book and it's now borne out even in the past weeks by studies showing the value of ESG investments. So, in this current situation as we face this pandemic, it's becoming clearer than ever the companies can only maximize their value and their growth in the context of a healthy and vibrant community. So, in order for companies to grow their value, to maximize profits, employees, customers and communities must be safe and healthy and live in equitable societies where everyone is safe. Every family has a home and food on the table and everyone has access to quality education and healthcare, jobs among other things. So, if we’re learning anything today, it's that the health and welfare of every member of the community is interconnected and it's now glaringly apparent that we depend, we all depend on the well-being of hourly wage workers who have now become among the most essential members of our society but they have been the most vulnerable.

With regard to nonprofit board service, we have learned from three years of studies that when business employees serve on nonprofit boards, they gain an appreciation for the impact of the Sustainable Development Goals, the SDGs on their communities and their companies. That is that access to education, healthcare and jobs, food, housing, these are necessary in order for a community to thrive and for the company to do well. So, when employees serve on nonprofit boards, they develop an understanding of the connection between the health of the community and the company's success. They also gain an appreciation and this is borne out by three years of our studies that they gain an appreciation for the perspectives of people from diverse backgrounds for problem solving and innovation and they take that newfound enlightenment back to work by listening more thoughtfully to ideas and perspectives of people from different backgrounds, forming more inclusive teams and committees and hiring and promoting more inclusively. They also develop greater empathy which again in these times, what a tremendous value that is. We also see from our studies how much mid-career professionals grow and develop as a result of their board experience in terms of skills, strategic planning, crisis communications, consensus building, decision-making and personal and professional development, ethics, accountability, accepting more responsibility, leadership development. All of which prepare them to qualify for advancement and promotions.

So, and on the issue of diversity and inclusion interestingly, we found that among employees who want to serve on nonprofit boards but who have not yet had the opportunity to do so, there are more women, more young professionals in their 30s and more employees from diverse racial and ethnic backgrounds. They are waiting in the wings. They bring experience and expertise as well as unique value to advance innovative solutions on nonprofit boards and back at work. You asked, Michael, how nonprofits benefit. Nonprofits benefit by gaining people on their boards who bring valuable experience, skills and expertise as well as access to resources, sometimes financial but also in terms of getting access to pro bono volunteers from the company with a board member who can say gee, we could use some folks from the company who can provide some legal expertise, human resources, communications and so on. So, nonprofits benefit tremendously and know this. And furthermore, the majority of people whom we've matched to nonprofit boards, over a thousand people, rise to leadership positions on the boards. This is a function of making a good match. The right person to the right board and providing really good training.

Michael Young:

We wind up on this podcast talking so much about negative externalities. These are positive externalities that come out of this collaboration between corporate professionals serving on not-for-profit boards. It's a really, really interesting outcome and exciting to hear that it deepens the understanding of SDGs, of diversity, the need for inclusion. All of these things that are words on paper but then they come to life as corporate and not-for-profit professionals interconnect and work on solutions, community-based solutions. So, I'm really excited to hear about that and know more about that. And I guess maybe back to COVID for a second. Short term we're seeing the effects of COVID and I always think about that line about—it's been said about technology, we overestimate the impact in the short run and we underestimate it in the long run. How is COVID in particular going to impact this dynamic between communities and corporations in the long run? Just predict the future for us, Alice.

Alice Korngold:

Good question. And I think the effect is powerful. As you say, when people serve on nonprofit boards, these issues—education, healthcare, other aspects of the sustainable development goals—come to life as does the value of diversity and inclusion. These are things you can't train people to understand. They have to experience it. And when they sit on nonprofit boards, they experience it. And as we're going through COVID for the first time as an entire global community, we are experiencing the detrimental effects when companies and communities are not making sure that everyone has food on the table, a home, a job, safety and security. So, something that academics wrote about, people like me who are immersed in this write about, talk about, was it just seemed like oh, yeah, that's nice. That's kumbaya. And now we're seeing that these issues, housing, economic development, food security, healthcare, that a company will not succeed, thrive or grow shareholder value, however you want to define success without paying extreme attention to these matters. And I mentioned our three years of studies that have been driven by multinational corporations that show the benefits of nonprofit board service to companies, their employees, nonprofits and communities. What excited those of us who are involved in this is that we've always seen the value of [inaudible 00:21:13] board service anecdotally and through our impressions but these studies provided evidence.

One of my favorite scenarios I would suggest that people imagine is that a CEO or a division or department head is meeting with his or her executive team, several people around the table talking about a strategic issue, expanding the company’s presence in a certain region, establishing a new factory in a certain location. And what I've always imagined is that if you have team members around the table each of whom has some experience serving on a nonprofit board addressing a variety of issues, then you have people around the table who will say let's think about the implications of this expansion in terms of the availability of healthcare service of the community or workforce development or food security or housing in terms of our ability as a company to be successful as we enter or expand our presence in this particular community. And for that person to say so, what do we need to do to assess and strengthen the community so that we have a great workforce to be successful in achieving our corporate ambitions? So, that was a scenario I've described for a long time. It’s been my passion now for a few decades. And now I think it becomes very apparent that having people on a business team with some enlightenment exposure to these issues in the community will bring a great deal to the table to the discussion and actually in the absence of any experience or knowledge, how lacking would that conversation be.

Michael Young:

And maybe you could also expand it and I think you've been talking about it here, in particular stakeholder advisory councils. You recommend that as part of how businesses should be thinking about and organizing internally. Say more about how that functions and how should be says be thinking about that.

Alice Korngold:

So, stakeholder advisory councils. So, companies in the past several years have been big on forming such groups of experts from investors to environmentalists to employee advocates to meet with usually senior members of a company often even including the CEO as a sounding board for the company's sustainability strategy and that's great. But stakeholder engagement is broader than that and companies that are most successful are ones—and again this is in the case studies in my book but now it becoming glaringly apparent in these circumstances—companies are most successful when they really take the pulse of the communities, of people in the communities where the company has a presence, among employees, among customers, among nonprofits. We talk about accountability and expertise and credibility, getting the input of nonprofits in relevant spaces. So, companies that are good at stakeholder engagement have a lot of ways to learn from a variety of stakeholders about their interests and their concerns and can create corporate strategies accordingly and not be surprised or blindsided when things might go awry. But it's really a matter of doing more thorough market research including, for example, the needs of employees. So, earlier you mentioned the Financial Times article about the gig economy. A company that really took the time to understand the needs of its employees for security, for healthcare, for food security, other kinds of issues related to their salary and their benefits, companies that invested in employees in that way will make it through these days much more effectively than companies that thought they could get rich quick by ignoring the needs of employees.

Michael Young:

Ultimately, stakeholder capitalism is going to be proven out here in these days in this time in this age more than ever. Right? It'll be black and white. Everyone will see okay, these companies got it, did it right. These focused on short term and as the result are probably not going to do as well.

Alice Korngold:

There has never been a dichotomy between shareholder value and stakeholder interests because you cannot grow shareholder value if you're mistreating employees, if you're violating human rights, if you're not providing for your employees and for the community to be healthy and vibrant because your company will not succeed and ultimately, that will affect shareholder value and that's what ESG investing is about and this experience is bringing great clarity to this issue.

Michael Young:

Yeah. Absolute stark relief here. Alice, I want to have you back to check in on this topic again on the podcast if you'd be willing to do that because you bring a tremendous perspective and a lot of insight here. And I just want to say for our listeners, I love following you on Twitter. How can people find you?

Alice Korngold:

Thank you for asking, thank you for having me and I would love to continue this discussion because I think it's going to change by the week just as our reality is changing by the day, by the week. Thank you. People can get in touch with me by emailing me Alice@KorngoldConsulting.com. You can download the studies I reference for free easily on the website, BetterWorldLeadership.com and I want to acknowledge our NGO partner PYXERA Global which is the world's premier NGO that involves business employees in pro bono volunteering in the U.S. and abroad and recognizes that nonprofit board service is highly complementary to pro bono service. So, we're in this together. It's a great organization and team and we're accelerating our efforts to make it possible for companies to involve their employees in this kind of productive work which again benefits companies, their employees, nonprofits and communities.

Michael Young:

We will put all of that in the show notes, the links that you just mentioned. We'll put that in the transcript and if you could also give folks your Twitter handle because you have an excellent, excellent Twitter handle as well.

Alice Korngold:

Thank you. It's @AliceKorngold and I welcome you to interact with me by a Twitter as well.

Michael Young:

Fantastic. All right. Alice, thank you again for coming on the podcast and we look forward to talking with you again.

Alice Korngold:

Thank you for having me.

The Purpose, Inc. Podcast is a production of Actual Agency, helping innovators communicate in a changing world. More at www.Actual.Agency.

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