26 July 21
While financial performance was once the primary measure of success for many organisations, changing sentiment among multiple stakeholder groups is driving the need for a more holistic focus. The Yield talks to triple bottom line consultant Michael Watts to find out more.
For any organisation, the best time to identify its purpose is right at the start.
The second-best time is now.
That’s according to Michael Watts, founder and managing director of consulting firm ToBe Advisory.
Michael says defining a purpose from the outset allows organisations to build their businesses with clear social and environmental objectives in mind.
“By defining the purpose upfront, it becomes part of the fabric and culture of the way an organisation progresses,” Michael says.
“If that hasn’t happened, there’s typically a whole cultural change and organisational transformation that needs to occur.”
However, helping organisations navigate those kinds of transformations are one of the key reasons Michael set up ToBe Advisory in the first place.
The company’s focus is Triple Bottom Line consulting, or the notion of putting people and planet alongside profit as a key measure of business performance.
“When I was looking for the thing that would differentiate my business from others and thought about what strengths I could bring to the table, I realised that by and large, organisations put a lot of focus on financial performance, but not so much on people performance,” Michael said.
“When it comes to the public domain and the boardroom, there’s plenty of rigidity around financials but less definition around how to measure capability and culture.
“Whether you call it triple bottom line consulting, ESG or holistic business management, the focus is how an organisation can deliver outcomes that are in the best interests not just of shareholders, but of their entire stakeholder group.
“And that means considering more than just the numbers, and how to measure and report.”
Michael says one of the longstanding barriers to measuring some of the “less tangible” metrics has been a lack of suitable technology. While business leaders are quite accustomed to implementing systems to measure financial performance or customer spend, it has been more difficult to accurately assess qualitative aspects such as environmental, social and governance performance.
“However, technology now allows us to pull together data sources and the associated narrative to create a far clearer picture of what’s going on,” he says.
“There’s also regulatory and legal frameworks that have come into play.
“As these come together, organisations are far better placed to address many of the things their broader stakeholder groups want to know about alongside financial performance.”
According to Michael, more research is emerging that shows organisations with clearly defined purposes beyond just profit and shareholder return are becoming more successful businesses, whether it’s from the perspective of customer satisfaction, investor sentiment, employee engagement or community perception.
It is also a case of cultural change and shifting some of the traditional styles of leadership that persist across certain industry sectors.
“For a long time, there was a perception that a focus on profit was the polar opposite to purpose,” Michael explains.
“But with a lot of major institutional investors and financiers now considering far more than an organisation’s financial credentials, as well as that broader societal pressure that’s mounting, the tide is rapidly changing.
“It coincides with younger generations moving up the ranks into leadership roles and having different focuses to their predecessors.”
Michael says helping organisations develop strategies, and implement the reporting systems and processes to provide that more holistic view of performance, is what gets him out of bed each day.
Timing has also played an important role and he says the hard work to establish his business is coming to fruition.
“All of these things – from mounting public pressure and investor sentiment, to legal and regulatory requirements, to an underlying desire and personal purpose among many leaders to improve all aspects of their businesses – is coming together in a perfect storm,” Michael says.
“It’s an exciting time to be part of it.”