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It‘s unlikely you‘ve heard of Arthur Pigou, the Cambridge University economist who laid the groundwork for “stakeholder” capitalism. Pigou, who died in 1959, argued that production of goods and services often involves costs that are borne not by the producer or the end customer, but by society at large. These “externalities,” as he termed them, are a hidden tax on public welfare. Examples might include the CO2 emissions of combustion-powered cars, the negative impact of social media on mental health, and the social costs of discriminatory hiring practices.
In recent years, as the side effects of unfettered capitalism have become more visible and noxious, companies have been pressed to embrace a mission that goes beyond profits. Much of the squeeze has come from asset management companies, like Blackrock, that have threatened to disinvest from businesses that fail to take steps to improve their environmental and social impact. Governments are also tightening the vise. In April 2021, the EU passed its pioneering Corporate Sustainability Reporting Directive, which will compel 49,000 European companies to publicly report their progress in addressing climate change and other environmental threats.
While investors and governments have been laying the tracks for Capitalism 2.0, most CEOs have been on the back foot—greenwashing objectionable practices with eco-themed PR, endorsing bland statements about “social purpose,” and generally doing little more than what is legally required.
During his ten-year stint as CEO of Unilever, one of the world‘s biggest food and personal care companies, Polman was a notable exception to this collective foot-dragging. Polman prioritized long-term value creation and made sustainability the centerpiece of the company‘s strategy. Unilever‘s Sustainable Living Plan, launched in 2010, called for a 50% reduction in the company‘s carbon footprint, a sizable cut in landfill waste, and a commitment to 100% sustainable sourcing. Progress since then has been impressive: CO2 emissions are down 75%, water abstraction is down 49%, and landfill waste is down 34%.
Polman retired from Unilever in 2019, but his campaign for responsible capitalism continues—now from the platform of his non-profit foundation, Imagine. Recently, we sat down to talk with Polman about his long campaign for responsible capitalism, and his recent book, Net Zero: How Courageous Companies Thrive by Giving More Than They Take.
We started by asking what had propelled him to set such ambitious targets for Unilever. He says:
I was the first CEO to come from the outside, so I spent a lot of time studying the history of the company, going back to the roots of Lord Lever who started Lever Brothers at the end of the 19th century. he believed in “shared prosperity.“ He didn’t build the company for the shareholders, nor for himself. He reduced the work week to six days, put pensions in place, and guaranteed that the men who went off to fight World War I would have their jobs when they came back. I held my first board meeting in Lord Lever‘s house to make a strong message: “We‘re going back to the core of this company.“
When Polman took over in January 2009, Unilever had been underperforming its major competitors for more than a decade. How, we asked, did investors react to Polman‘s goal of creating long-term value for all stakeholders? As a new CEO, he must have been under tremendous pressure to pump up earnings. “I argued that the company had become the victim of short-termism,” says Polman, “and had started chasing its own tail. If you see profits going down, you start cutting R&D, brand spending, and investment in people. So the spiral keeps going and you cut more and more.“
Polman continues:
I thought the company needed something more energizing than trying to make its numbers. Growth for growth‘s sake is not very motivating. So we went back to the roots and said, let‘s introduce a Sustainable Living Plan, where we take ownership of our total impact in the world. In the food business, you need to attack the issues of deforestation, improving the livelihoods of poor farmers, reducing food waste, and tackling obesity.
These are noble goals, but, we pressed the question again: How did Polman sell his vision to shareholders? “I told them,” he says, “that you cannot optimize one stakeholder—the shareholder—at the expense of the others and expect to maximize long–term returns. Shareholder returns are the result of what we do, and not an objective in itself.“
This is a simple truth, and one often missed by CEOs, who are prone to mistake the scoreboard (shareholder returns) for the game (empowering employees, encouraging breakout innovation, delighting customers, and strengthening communities). In some companies, it seems as if the entire executive team has abandoned the playing field and is crowded around one of those old, pre-digital scoreboards, wildly trying to manipulate the numbers. While share buy-backs, mega-deals, and downsizing can plump up the share price, they aren‘t strategies for long-term value creation.
Enough about shareholders, what about Unilever‘s employees? “After years of retrenching,” we asked, “they must have been burned out and cynical. How did you bring them along?”
“Before we launched the Sustainable Living Plan,” Polman says, “we spent a year with the top 100, then the next 500, then the next 3,000, developing our collective purpose. And the first question we asked was, ‘What is your own purpose? What gets you up in the morning?‘ The second question was, ‘How do you use that purpose to influence others?‘ And the third question was, ‘How do you get results with that?‘ We wanted everyone to become more aware of their own purpose in life, which frankly, few people have thought about. But it was important to have a leadership team go through their own journey to discover their purpose.“
Enlightenment is, we agreed, is a pre-requisite for change, but often not enough. Many of us, for example, know we need to shed a few pounds, but lack the discipline to work out each day. How, we asked, did you move your colleagues from awareness to action?
“The key,” Polman says, “was creating more than 50 ambitious ‘time bomb’ targets.” These highly specific goals made the company‘s newly discovered purpose tangible for every employee. Moreover, in a “burn the boats” move, Polman made the targets public and asked PwC to produce a yearly progress report.
Here, again, Polman‘s experience dovetails with our own. No company out-performs its aspirations, and it usually takes an ambitious and noble goal to coax people into re-imagining legacy systems and practices. By way of example, Polman describes the challenge for Unilever‘s procurement function. “For years,” says Polman, “procurement had been focused on squeezing the last penny of costs out of a supplier. All of a sudden it has to focus on sustainable sourcing, on longer-term relationships with suppliers, and leveraging their infinitely bigger R&D capabilities to drive innovation.“
This sort of radical shift didn‘t come easy to all of Unilever‘s senior executives. Country managers, many of whom had grown up in the finance function, found the pivot particularly difficult. Having become adept at downsizing, they were now being asked to embrace a new social mission and grow the business in new directions. Retooling mindsets is never easy, and over the next few years, 70 of Unilever‘s 100 top local leaders were replaced.
Another barrier was Unilever‘s bloated management pyramid. Says Polman:
A former boss told me that when it comes to transformation, you need to add a yearfor every level in the organization. That wasn’t appealing to me. When I arrived, Unilever had 12 layers or 14 layers, so I reduced that to five layers to make the organization agile again.
Even with these moves, Polman admits that it was four to five years before he knew the changes would stick—before “moral capitalism,” as Lord Lever called it, was once again imbued in the company‘s DNA.
As you might suspect, Unilever‘s all-in bet on sustainability has been widely praised. The GlobeScan/SustainAbility survey has ranked Unilever as the world‘s most environmentally minded company for ten consecutive years. Nevertheless, there are detractors. Some have scoffed at the company‘s attempts to imbue each of its brands with a higher purpose. Isn‘t it enough, critics ask, for Hellman‘s mayonnaise to simply improve the taste of a sandwich? More worrying is the fact that Unilever‘s share price, which rose 290% during Polman‘s tenure, has under-performed the market since 2020—a reminder that being green doesn‘t cure every operational ill or remedy every strategic misstep.
Nonetheless, Polman, more than any other CEO, has provided leaders with a template for building a business that serves all of its constituents—and merits their trust. That‘s a substantial accomplishment, given that a 2020 global survey by Edelman found that only 29% of respondents believed that big business serves the interests of “everyone equally and fairly.”
As Polman will tell you, it takes grit and perseverance to proactively re-vector an immensely complex global business. But most of all it takes heart. “The word ‘courage,‘” Polman reminds us, “comes from the French ‘cœur,‘ which means ‘heart.‘ We have to humanize leadership again, we need empathy, compassion, the ability to listen to others, and we must be inclusive and purpose driven.“
This is wise counsel for anyone who believes it’s time we stitch up the hole in the soul of capitalism.
Gary Hamel is a business thinker, author, and educator. He is on the faculty of the London Business School and the Harvard Business Review Press best-selling book, Humanocracy: Creating Organizations as Amazing as the People Inside Them.
Michele Zanini is the co-founder of the Management Lab (MLab), where he helps organizations become more adaptable, innovative, and engaging places to work. He is the coauthor of Humanocracy: Creating Organizations as Amazing as the People Inside Them.
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We remember the conversation clearly, though it took place more than 20 years ago. He was sitting in his home office, a few miles from Palo Alto, California.
Across the table was one of our heroes, Jim March. An emeritus professor at Stanford University, March was regarded as one of world’s preeminent organizational theorists. The topic that afternoon was his seminal article, “Exploration and Exploitation in Organizational Learning,” which had been published in 1991. In the piece, March laid bare the roots of one of the most perplexing challenges in business—how to wring the maximum value out of current assets and capabilities (exploiting) while simultaneously inventing the future (exploring).
The problem is that these activities are as different from one another as carpentry and painting, weightlifting and gymnastics, or, as our British friends would have it, chalk and cheese.
As the professor put it in his research paper: “The essence of exploitation is the refinement and extension of existing competencies, technologies, and paradigms. Its returns are positive, proximate, and predictable. The essence of exploration is experimentation with new alternatives. Its returns are uncertain, distant, and often negative.”
Gary’s question to the professor all those years ago was, “Can we ever hope to build organizations that are good at both explore and exploit? Must one always come at the expense of the other?” March peered out the window as he mulled the question, then quietly shook his head. “No,” he replied. “I don’t think that’s possible.”
He had good reason to be skeptical, and if he were alive today (he died in 2018), he would find little reason to reconsider his assessment. It’s still the insurgents, not the incumbents, that turn industries upside down, and try as one might, it’s hard to think of a large organization that’s as daring as it is disciplined, or as creative as it is cost-conscious.
Fortunately, not everyone has given up on the challenge of building organizations that are efficient and entrepreneurial. There are a few dogged souls (and we count ourselves among that number) who believe it is possible to turn either/or into both/and—and one of the most thoughtful is Eric Ries, the best-selling author of the The Lean Startup and founder of the Long-Term Stock Exchange.
Like us, Ries has spent a good part of his professional life trying to inject entrepreneurial DNA into established companies. As you’d expect of a serial entrepreneur, he’s an optimist, but not naive. He understands that the bureaucratic structures and processes found in most organizations are toxic to innovation.
In a recent interview, he shared with us: “Your average product manager often spends 50% of [their] time trying to defend a budget that’s already been allocated to the project. It’s just a complete waste of time.”
The problem goes deep, Ries notes. “In a traditional organization, everyone is paid to eliminate variations, [which] means eliminating new ideas,” he says. “You have a kind of status quo bias combined with incentives that reward defensive thinking over the pursuit of new opportunities. Then you add the disease of short-term thinking, and it’s a pretty toxic brew.”
Given this diagnosis, Eric agrees that Jim March was right—until a certain point. It is impossible to be both efficient and entrepreneurial in an organization that’s built on industrial-age management principles. “I don’t think it’s fair,” says Ries, “to expect that the top-down org structure that served Alfred Sloan at General Motors (Sloan was chairman of GM from 1939–1956), to be effective today. That’s asking a lot. We need to recognize the strengths of traditional management, and then expand the toolkit to encompass the things that harness and accelerate human creativity.”
Editor’s note: This article is part of the video and editorial series The New Human Movement, which aims to highlight bold thinkers and doers who are reimagining work and leadership.
Gary Hamel is a business thinker, author, and educator. He is on the faculty of the London Business School and author of the Harvard Business Review Press best-selling book Humanocracy: Creating Organizations as Amazing as the People Inside Them.
Michele Zanini is cofounder of the Management Lab (MLab), where he helps organizations become more adaptable, innovative, and engaging places to work. He is the coauthor of Humanocracy: Creating Organizations as Amazing as the People Inside Them.
We all fail, and failure can result in some of the greatest lessons. But would you share those failures with potential employers? Most of us would give that idea a hard pass, but Eli Joseph, author of The Perfect Rejection Resume: A Reader’s Guide to Building a Career Through Failure, suggests that you do just that by writing a “rejection resume.”
“Most people tell themselves not to think about the negative things in life,” says Joseph. “When we talk about Elon Musk and other successful people, we talk about the ways they’ve succeeded. But they’ve all had failures, too. It’s okay to fail. You can learn from your mistakes and rebound.”
Joseph has had his share of rejections. Between 2014 and 2019, he submitted more than 1,200 applications to various schools, courses, colleges, and jobs. He says the hundreds of rejections helped make him who he is today, which includes being a faculty member at the Columbia University School of Professional Studies—a school that rejected his application as a student. Realizing that his failures lead to successes, Joseph decided to document them and make them public by posting a rejection résumé on LinkedIn.
“Rejection and failure are never perfect, but they are perfectly aligned with your story,” he says.
How to Write a Rejection Résumé
From the time you started applying to colleges, you’ve likely had some successes and failures. Joseph suggests jotting them down and creating a résumé from it.
“Start just like a regular résumé,” says Joseph. “State your objectives or your purpose. Write down how many courses you failed, how many schools rejected you, how many times you were fired from a job, and how many jobs you didn’t get. Then, lo and behold, you will have a good solid résumé of your trials and tribulations.”
Joseph formatted his like a traditional résumé, breaking rejections into “Education,” “Experience,” and “Engagement, Honors, and Awards.” For example, he shares that he submitted 652 applications to JP Morgan Chase, had three interviews, and zero job offers. He also applied to speak at five TED events and was denied every time. Today, he is a TED member and he spoke at TEDxSyracuseUniversity in 2018.
How to Use It
Your rejection résumé can be a compass when plan A doesn’t work. “When you jot it down and have documented proof that your original plans don’t work, you can cultivate some alternatives,” says Joseph. “You may decide being an employee for certain jobs or organizations is not working out. Or you may want to become an entrepreneur. Try to decipher what you could have done differently.”
While you can keep this information to yourself, Joseph challenges people to share their rejection résumé by posting it on LinkedIn as a unique way to build a network and potentially field new job offers.
“When people post their struggles, it often resonates with a lot of others,” he says. “It says, ‘Here are the jobs and organizations that have rejected me, but I’m still here. I’m still optimistic about my future.’ If your connections or followers on LinkedIn relate to your story, perhaps it may go viral. You could have offers coming from the same organizations that have rejected you.”
You can also contrast your rejection résumé with your actual résumé to show your resilience. “When I showed my rejection résumé, my goal wasn’t to put a bad taste on the organizations, like JP Morgan and Goldman Sachs. I had applied to JP Morgan and Goldman Sachs so many times, and I’d been rejected. This isn’t pointing a finger. It’s saying, ‘It’s okay to fail. Keep trying.’”
Sharing your failures can also be helpful for other people and their path to finding success. “I get feedback from others who have failed, trying to do similar things to what I tried,” says Joseph. “When they see my struggles and how many times I failed, it feels reassuring to them. And when they look at the positive and good in my profile today, it can serve as inspiration. Use failures as navigation. Stay the course. Things will get better.”
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