Going Social: Why Businesses Must Invest More in Human Capital
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According to a fresh study released by Deloitte Insights, there’s a new metric being used to measure the success of an enterprise. That is the success and strength of its relationships with its employees and customers as well as the community at large.
In fact, nearly two-thirds of CEOs surveyed indicated that inclusive growth was a top concern. It was actually ranked three times more important than shareholder value.
So what is inclusive growth? It is a model of business growth that doesn’t only focus on profitability for company executives and stockholders. Instead the focus is also on health, community well-being, environmental protections, and the economic health of all.
To be clear, this focus isn’t a sign that corporations are becoming more kind-hearted. It is a sign that the priorities and values of Gen Y and Gen Z are having an impact. A previous Deloitte study showed millennials want to work with companies that care about the environment and other social issues.
The origins: an economic recovery that helped few
In 2008, the economy recovered from the greatest downturn since the great depression. The only problem is that while business grew and the stock market boomed, the general public really didn’t feel any benefits. Those who lost homes and savings thanks to the unethical behavior of fund managers and others still struggled. In the meantime, those who caused the economic collapse didn’t just escape punishment. They flourished, reaping economic rewards through bonuses, dividends, and raises.
This sparked the Occupy Wall Street movement. More importantly, it created a shifting perspective among young people. Many questioned why they should want to work to benefit companies that caused so much damage, and began actively seeking out companies who care about social good.
86% of millennials also believe that their lives are likely to be worse than their parents. One thing they are doing is questioning the responsibility the behavior of business has in this. While it may seem as if businesses are taking all the blame, it’s important to realize that business is also a source of hope.
Benefits of building a social enterprise
As mentioned above, millennials and members of Gen-Z actively seek employers who are socially responsible. This means one of the primary and immediate benefits of going social and investing in human capital is that you’ll attract and retain better talent. Even better, this will be young talent poised to grow with your organization. 30% of these employees say they work more efficiently when they are employed by organizations that prioritize a social cause. This could lead to the next benefit.
Going social leads to a competitive advantage. Just like people want to work with social organizations, they also want to do business with them. This puts people working for these companies at an advantage. The social becomes a selling point and a way to build relationships.
Small businesses that are investing in social capital growth
It isn’t just large corporations that are seeing the benefits of moving in this directions. Many small businesses are emphasizing the importance of human capital and social entrepreneurship. Consider the following instances from the United States.
One example of this is National Business Capital. They offer business loan funds to veterans who often do not qualify for business capital from traditional lenders. By reaching out to a group that is struggling now more than ever with reduction in funding for care and threats to veterans benefits, the company not only does good, but they put themselves in a favorable position with potential employees, investors, and customers.
Another company focusing on social capital growth is Eyezz. It was founded by a business woman Anna Smirnova with an idea to support children suffering from cancer. Anna became motivated to this business model while helping her mother fight cancer. Once her mother passed away, she started this business and for each pair of glasses they sell, they donate a part of the profit to a foundation involved in fighting childhood cancer.
Then, there is McQuarrie. They work with, fund and take an active role in many local foundations and institutions, especially in the healthcare sector. This means that not only are they helping people and businesses with their legal needs, they are also helping the local community in diverse ways that go beyond the scope of the firm's professional service.
Social enterprise is not charitable giving
Businesses that invest in human capital and are moving towards socially responsible growth models may choose to give back through charitable donations. However, doing so does not mean they are following an inclusive growth model, according to data from Aston University. Instead, the move should be towards making business decisions in every area from product development to hiring to sales and marketing with a focus on ensuring that decisions made have the potential to have an environmental, economic, and social benefit to the community.
Now more than ever, successful enterprises will need to focus on human capital and social responsibility. Growth, success, and the ability to retain talent depends on them doing so.