Employee Wellbeing, a Non-Financial Indicator

Employee Wellbeing, a Non-Financial Indicator

In the wake of last month’s Rana Plaza factory collapse that killed over 1 000 Bangladeshi workers, signs have pointed to increased pressure, not only on the Bangladeshi government, but also on western retailers, to improve conditions for the country’s millions of garment industry workers. Big names like Tesco, C&A and Primark have suddenly signed on to a year-old deal to help Bangladeshi factories meet building and fire safety standards. But while this tragedy has brought longstanding problems into sharp focus, will anything really change? 

“Non-financial goals like employee wellbeing and environmental responsibility are often the subject of debate,” explains ProfessorNicolas Mottis. “A lot of businesses talk about non-financial goals, but don’t necessarily make them a reality within their day-to-day operations. They issue glossy sustainability reports and talk extensively about their role in society. But at the end of the day, relatively few businesses are really making a difference.”

“That said, non-financial business goals are something that managers are more and more likely to at least talk about. Signs point to a slow change in attitudes. And while research still shows that relatively few businesses are really deeply changing their practices, things may be set to change in years to come.”

Will tomorrow’s managers be more likely to set non-financial business goals?

Professor Mottis believes that business education is an integral part of this evolution – instilling in managers an understanding of the links that can exist between responsibility and performance, of the compatibility between financial and non-financial business goals.

“Business leaders are slowly starting to place more importance on corporate social responsibility and branching out from more traditional perspectives. That said, adding a non-financial focus means looking at different types of data and looking at more than just numbers. This isn’t always easy and takes training because benefits aren’t always clear-cut,” he says.  

In other words, sometimes, corporate social responsibility makes clear financial sense: recycling and cutting down on consumption saves money and can impact a business’ bottom line. But other times, particularly where pollution and employee safety are concerned, responsibility can come at a cost, at least for the short term in the eyes of managers under tough budget pressure.

“If you’re leading a business who produces goods in Bangladesh, for example, there are few regulations,” explains professor Mottis. “If the manager of a chemical plant doesn’t feel morally bound, on a personal level, to protecting water safety, they can in some cases do almost whatever they want. What is the drive to fulfill this kind of non-financial goal? Sometimes brand image can come into play, as is most certainly case for brands like Primark and H&M who were directly impacted by the recent disaster. The thing is, if you’re a company dealing strictly in business-to-business transactions, can come into play, image repercussion for bad behavior can be very limited.”

There can be perceived drawbacks, he adds: if a manager chooses to pay his employees a fair wage, invest in the safety and well being, and make a real commitment to protecting the environment, the product will be more expensive and could put that business at a disadvantage on the marketplace. So beyond highlighting the financial benefits of some types of responsible action, business education today is also about instilling in future managers a strong sense of ethical responsibility.  And more importantly, beyond that proving to students that innovation in business models can be a real source of both financial and non-financial performance is a fantastic avenue for progress.

The fifth edition of his “Contrôle de gestion et pilotage de l’entreprise” is a perfect illustration of this evolution: it puts a new focus on corporate social responsibility, non-financial performance and ESG criteria (environment, society and governance.) In short, it tries to show how managers can integrate non-financial objectives into their management style, and how they can find the link between the non-financial and the financial.

“This book is the fruit of a 15-year collaboration between the three co-authors: ProfessorsPhilippe Lorino andRené Demeestere and myself ” continues professor Mottis. While it tries to look at the bigger picture – it also looks at the largest number of leadership methods possible. So over the years, we’ve added to it with respect to products, processes, business units and more. Publishing a fifth edition of a book of this kind is fairly rare – two or three editions is more common – so this is really a testament to its usefulness in the field. Plus, we’re really pleased this time around to have a preface by Louis Gallois.”

As he explains, amongst other leadership tools, the book puts a new focus on non-financial dimensions like Corporate Social Responsibility (CSR) and Socially Responsible Investment (SRI): traditional factors like environmental impact, consumption and employee health, but also on new ones like wage policy. I.e: when defining a bonus policy, do firms look at financial goals met by the employee or do they also look at non-financial goals?

The First Question for A Future Manager: What is Performance?

“When training future managers, I always start with the question – what is performance? Is it only about the bottom line, or is it more than that?” says Professor Mottis. “Realizing that environmental and social goals are also integral part  of firms performance and not only external constraints is an important first step. The second is to find operational ways to manage their interactions.”  Indeed, ensuring that responsible leadership grows from this increase in public pressure means giving future managers the tools to act differently and to think about old problems in a new way.  The business leaders of tomorrow need to see beyond numbers to understand that performance is a really multi-dimensional concept.

Further Reading:

 "L'ISR à la recherche de nouveaux élans", published in Revue Française de Gestion
 "Socially Responsible Investment in France", published in Business & Society
 "L'investissement socialement responsable en France : opportunité "de niche" ou placement "mainstream" ?", published inGérer et comprendre
 "Création de valeur, 10 ans après...", published in Revue Française de Gestion

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