5 elements of stakeholder-centric leadership that lead to stronger financial performance

by | Feb 3, 2020 | Public Relations

At Davos this year, it was established that corporate leaders have entered a new phase of doing business—one where profit is not the only driving mission. Today’s execs want to embrace their duties as stewards of corporate responsibility and cater to the interests of all their stakeholders, not just investors.

A new research study from the World Economic Forum, in collaboration with Accenture, has identified five elements at the heart of a new model of responsible leadership for an era of stakeholder capitalism—one that focuses on strong organizational performance in concert with positive social and environmental impact.

The study suggests that tackling the challenges of the coming decade to accelerate growth and improve societal outcomes will require a wider range of attributes and characteristics from leaders, which the study identifies as the Five Elements Model of Responsible Leadership:

5 elements of stakeholder-centric leadership that lead to stronger financial performance

5 elements of stakeholder-centric leadership that lead to stronger financial performance

“The climate crisis, growing inequality and economic fragility threaten human wellbeing like never before,” said Adrian Monck, managing director for the World Economic Forum, in a news release. “We need a stakeholder approach in which companies combine entrepreneurialism with purpose, working with others to improve the state of the world in which they operate. The good news is that the next generations want to develop the broad range of leadership skills needed to make this happen.”

The new report, Seeking New Leadership, is based on surveys of more than 20,000 people—comprising members of the World Economic Forum’s Young Global Leaders and Global Shapers communities (“emerging leaders”), CEOs and other business leaders, and employees, consumers and other stakeholder groups, as well as an econometric analysis of company performance and other original research.

The report highlights the growing demand for businesses to address environmental, social and economic issues in return for their “license to prosper.” For instance, six in 10 (61 percent) of the emerging leaders surveyed said that business models should be pursued only if they improve both societal outcomes and profitable growth. Further, the vast majority of both business leaders (79 percent) and stakeholders (73 percent) said that the positive potential of emerging technology calls for businesses to reconsider their role in society.

Qualities needed for responsible leadership in business—the view of company executives:

5 elements of stakeholder-centric leadership that lead to stronger financial performance

Qualities needed for responsible leadership in business—the views of stakeholders:

5 elements of stakeholder-centric leadership that lead to stronger financial performance

According to the study, many business executives are out of step with stakeholders, who want leaders with more Emotion & Intuition and Mission & Purpose. Findings from an online focus group of more than 500 people from Generation Y and Generation Z conducted as part of the research also suggest that younger people believe that leadership decisions in the coming decade will require a balanced approach across all five attributes of responsible leadership.

Generations Y and Z draw on a broad range of leadership qualities:

5 elements of stakeholder-centric leadership that lead to stronger financial performance

Performance premiums associated with sustainability, trust and innovation

At the same time, the study notes that profits and responsible leadership needn’t be mutually exclusive; in fact, it finds a link between responsible leadership and higher financial performance. As part of the research, Accenture examined the financial performance and actions related to sustainability, stakeholder trust and innovation of more than 2,500 publicly listed companies between 2015 and 2018.

A key finding: Companies that achieve high levels of both innovation and stakeholder trust outperform their industry peers financially—with an average of 3.1 percent higher operating profits as well as greater returns for shareholders. In addition, companies that achieve industry-leading innovation, stakeholder trust and financial performance display all five elements of responsible leadership to a greater extent than do their peers.

According to the report, the findings suggest that only stakeholder-centric business models can unlock the full power of innovation to elevate organizational performance and drive societal progress.

“Organizations have not only the opportunity, but an obligation, to drive organizational growth in tandem with positive social and environmental outcomes. This starts with redefining what it means to lead responsibly,” said Ellyn Shook, Accenture’s chief leadership and human resources officer, in the release. “A new generation is leading the way, focused on driving value while honoring values―where a sense of mission, stakeholder inclusion and compassion becomes second nature. Through our collaboration with the Young Global Leaders and Global Shapers, we are excited to define and catalyze these new leadership qualities in the individuals and teams entrusted to shape the world’s future.”

Profitable and trusted innovators display all the Five Elements more strongly:

5 elements of stakeholder-centric leadership that lead to stronger financial performance

The study represents the first stage of a multi-year initiative between Accenture and the Young Global Leaders and Global Shapers communities of the World Economic Forum to create a new framework for responsible leadership and to help organizations cultivate environments in which responsible leadership can flourish.

Download the full report here.

The research comprised several streams, all of which were undertaken in 2019: The Accenture Responsible Business survey of 2,298 business leaders and 2,971 stakeholders in 11 countries; the Accenture Whole Brain Leadership survey of 11,400 consumers and employees and 200 C-suite executives across six countries; the annual survey of the World Economic Forum’s Young Global Leaders and Global Shapers (1,830 respondents); and economic modelling of data related to publicly listed companies.

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Richard Carufel
Richard Carufel is editor of Bulldog Reporter and the Daily ’Dog, one of the web’s leading sources of PR and marketing communications news and opinions. He has been reporting on the PR and communications industry for over 12 years, and has interviewed hundreds of journalists and PR industry leaders. Reach him at richardc@bulldogreporter.com; @BulldogReporter

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