January 02, 2024
Should businesses take a stand for or against particular societal issues? And how should leaders determine when and how to engage on these sensitive matters?
Harvard Business School senior lecturer Hubert Joly, who led the electronics retailer Best Buy for almost a decade, discusses examples of corporate leaders who had to determine whether and how to engage with humanitarian crises, geopolitical conflict, racial justice, climate change, and more in the case, “Deciding When to Engage on Societal Issues.”
BRIAN KENNY: In case you’ve ever thought about becoming a CEO, your job description might include things like, work with the board of directors to set goals for the firm, oversee finances, manage the entire operation and ensure compliance with laws and regulations, negotiate big deals like mergers and acquisitions. And if it’s a public company, you’d have to do quarterly earnings and of course, generate profits. All of these would be pretty standard parts of your job. Not explicitly mentioned, but definitely expected these days would also be something like wade into fraught social issues that seemingly have nothing to do with your day-to-day business and could potentially put you in the center of a political tsunami. Good luck with that. Today on Cold Call, we welcome Professor Hubert Joly to discuss the case, “Deciding when to engage on societal issues.” I’m your host, Brian Kenny, and you’re listening to Cold Call on the HBR Podcast Network. Hubery Joly is a senior lecturer at Harvard Business School and the former chairman and chief executive officer of Best Buy. He is also the author of The Heart of Business: Leadership Principles for the Next Era of Capitalism, and he is a repeat customer on Cold Call. Welcome, Hubert.
HUBERY JOLY: Well, thank you for having me, Brian. I look forward to our conversation.
BRIAN KENNY: Great to have you back, and I really enjoyed reading this case. So, thank you for writing it and thank you for coming on to talk about it. Let me ask you to start just by telling us what’s the central issue in the case and what’s your cold call when you start the discussion in class?
HUBERY JOLY: The central issue is of course, when and how to engage on some of these potentially controversial but important societal issues, knowing that doing nothing, ignoring these issues can be very dangerous and engaging can be also risky. And so, maybe the cold call would be, what criteria would you use to decide when and how to engage?
BRIAN KENNY: So, I do want to ask you about, a little bit later in the conversation, whether you’ve had to tow this line before? But before we get there, let me just ask you why you decided to write the case and how does it factor into the kinds of things that you’re thinking about as a professor at Harvard Business School?
HUBERY JOLY: Yeah. So, my focus is leadership matters, either supporting CEOs or senior leaders in Executive Education, and of course, future leaders in the MBA program. And as you indicated, Brian, this is a new field and a field where landmines have been dropped. And so this is new territory and in many ways, CEOs, leaders have not been prepared, right? When they went to school 20 or 30 years ago, it was not quite the same. So, writing this case provided the opportunity to review a number of instances where CEOs decided to engage and with of course, varying results. And of course, in the Socratic method that we love at HBS and also love Aristotle, you start from reality and you try to derive some principles. So again, you cannot ignore these facts, you might as well engage in this matter.
BRIAN KENNY: Yeah. And it’s unlike other Harvard Business School cases to the extent that it’s not really a narrative. There’s not like a one continuous story here. This is just mini chapters of the situation, and you lay it out beautifully and just very factual form. So, I thought it was an interesting departure. There’s been a lot of discussion for decades certainly, about what the role of the firm is, what’s the purpose of the firm? So, I would’ve just ask you what do you see as the purpose of the firm? And in that, what’s the role of the CEO?
HUBERY JOLY: Yeah, and of course we all remember on September 13th, 1970, a certain Milton Friedman wrote this very impactful article about the role of the firm. And he forcefully said, very forcefully, and of course there was a context around this, but that the sole purpose of the company was to maximize shareholder value. And in fact, he introduced a hiatus in the history of capitalism because before Milton Friedman, going back to the 19th century, companies had engaged on societal matters. They felt that they had a bigger role to play and that they were there to serve the common good and take care of different stakeholders, starting with their employees, but also the community. And so, for a while all of us were educated, right? Including at this wonderful school about … I remember when I was at McKinsey, this was what we were working on, optimizing performance. Now, we of course know that this is not valid, and I’ll take a very concrete example from my personal life. In May of 2020 when George Floyd was murdered in Minneapolis and I was still at Best Buy at the time, which is headquartered in Minneapolis. Of course, the city was on fire. When the city is on fire, you cannot open your stores.
BRIAN KENNY: Yeah.
HUBERY JOLY: Right? To quote a colleague, Rebecca Henderson, who wrote about this, “If the planet is on fire, you don’t have a business.” So, I think what we need is a declaration of interdependence and then go back to some principles around at the minimum as firms, we need a license to operate and we need to serve the common good over time. And it’s also the opportunity to address some of the most pressing issues in the world. So, I’m a big believer to my opinion today, shared by many, that the purpose of the firm is to do something good in the world and you can do well by doing good.
BRIAN KENNY: So, if the purpose of the firm has changed over time and evolved in the way that you described, then clearly the role of the CEO has also changed and evolved. What has changed in the world to drive that?
HUBERY JOLY: It’s changing expectations, right? And Edelman has published some statistics recently. Roughly speaking about two thirds of employees expect companies to play a role on societal matters. Two thirds of customers expect and prefer to deal with companies that they can connect with. And about 90% of investors take into account environmental matters and societal matters not for political reasons, it’s because these factors have an impact on business. As an example, if you’re an insurance company, Brian, do you think that climate change is going to have an impact on your loss ratio?
BRIAN KENNY: Yeah. Of course.
HUBERY JOLY: Of course it will be. And if we have a society where more and more people are excluded and don’t have the opportunity to get insurance. At the end of the day, maybe just you and I are going to be insured, which is not going to be a good way to diversify risk. We’ve written a case about a French insurance company, AXA, on this matter, and they’ve had to lead a re-foundation of their business around some of these trends.
BRIAN KENNY: Mm-hmm. When you were CEO of Best Buy, I’m wondering if there were issues that you felt were important to wade in on? And I would ask that in the context of you as the CEO of the firm or you personally, HUBERY JOLY, were there things that you thought were important to take a position on?
HUBERY JOLY: It’s an important distinction because … And for the most part, I think that’s why the CEO in many cases may be the spokesperson. He or she is going to speak on behalf of the firm. So, we’ll go back to this because I think there’s some major learning from looking at these cases is that you need a set of criteria, you need a process, you need capabilities to be able to decide when and how to engage. It cannot be just left in general to just the CEO. But to answer your question, at Best Buy back in 2012, in fact, I was still the CEO of Carlson Companies, another great Minnesota company. An issue in the state was that there was going to be a referendum on whether or not to include in the state constitution the fact that a marriage was between people from two different sexes. And we had to decide … And this was the first time I had to wrestle with this and my wrestling was, “Gee, this can be a religious matter, can be a very personal matter. To what extent as a company do we have the moral authority to weigh in on this?” Right? And we discussed it at the board, and in the end, a number of us took personal positions in the state on that, but not a position as a company. Later on, I changed my perspective and I said, “No, there’s also a company matter, which is that we need to take care of our employees and we need to make sure that our great state is attractive to talent.” So, you see how my thinking evolved in the perspective. Later on at Best Buy, we had to deal with, and it’s again, very current today about the Dreamers. And we joined a coalition of companies that expressed our views that these Dreamers, they were here through no fault of their own and who were contributing to the economy, they were students, they were workers, we had many Dreamers as employees of Best Buy, should be protected. And acting as a group was helpful. Then later on we had to deal with the question of the tension with China. As you remember, President Trump was introducing increasingly high tariffs with China. So, we actually worked with his administration and him on trying to educate him on the impact that this could have. And then of course, now I’m on boards of a number of companies and we deal with these matters of an increasing complexity. So yes, as a CEO, you just can’t ignore this stuff.
BRIAN KENNY: Got it. It’s like the last job I would want the way you’re describing it, but it also, I think it shows that firms can no longer operate in isolation. You exist in a context. You exist in a global supply chain. You have employees who are also people, who have lives, and they have positions on things. So, it’s a very, very complicated and difficult line to navigate, I guess. Is that fair to say?
HUBERY JOLY: Complicated. Which is why I think ahead of any crisis, and we’ve seen, and I’ve encouraged companies to do this, and leaders, we need to develop a framework for deciding how and when to engage. At the highest level, how does it fit with your purpose as a company? How does it fit with your values? And how does it impact your stakeholders? Right? So, these are important criteria. So, to take examples of applying this. If you’re Microsoft, gun control is not going to be really an issue for you, you’re not involved in selling guns or you don’t really have a say on this, you’re not particularly competent or legitimate on this matter. But immigration is going to be a big deal because a lot of your workers, including your CEO, are immigrants and it’s essential to your business. In contrast, Walmart, so Doug McMillon there, guns is a big deal. He sells guns. He’s had stores and employees attacked on a number of occasions with guns. And so, this is something that he may decide to get involved in. And so the first thing is, what is your set of criteria? And then within your firm, what is the process? Who are you going to engage? Who are you going to consult? If something happened, what are the resources, internal or external resources? You probably need to build external capabilities as well. Because Brian, and the case illustrates this, the range of topics that you may want to and have to engage in is incredibly broad, right? From the Uyghurs in China to abortion, to voting rights and immigration. And there’s no way as a CEO, you can be competent on all these matters. And you have to understand the options you have, the implications. How are you going to get engaged? Are you going to say something? Are you going to do something? Are you going to be doing this in isolation, just on your own, or as a member of a coalition or through maybe industry groups? These are all important choices. And usually you don’t have that much time to react.
BRIAN KENNY: Right, of course not.
HUBERY JOLY: So, you’ve got to be prepared.
BRIAN KENNY: Yeah. Yeah. Is there an option to just do nothing? Is that one of the options that’s on the table?
HUBERY JOLY: Certainly not. At least it’s very risky. Bob Chapek, when he became CEO of Disney, declared that unlike his predecessor, Bob Iger, he would stay away from these issues. That’s not really the business that Disney is in. But of course, when the so-called Don’t Say Gay bill was introduced in Florida, after he decided to say nothing, a lot of his employees, including also of course, one of the heirs of the Disney family, revolted and put pressure on him. So, then he was on the back foot. So, saying nothing can be very dangerous. Your employees, a key responsibility as leaders we have is those who are in our care and about these societal matters, we have to be careful. We’re not elected officials. We’re not competent necessarily on all of these matters, but we do have our employees, and that’s the first place to think about when they’re under attack or it’s an issue that they care about.
BRIAN KENNY: Yeah. Yeah. I also thought it was interesting, the case highlighted a couple of situations involving Starbucks. The first being that they had taken a stance on diversity by encouraging their employees to write a particular sentiment on the cups. They’re famous for writing things on the cups. And that had mixed reactions from people. A few years later, they had a situation in one of their stores where there was an incident that certainly seemed to be racially motivated, where two African-American men were sitting and they hadn’t ordered anything, people might remember this, and the employee asked them to leave. And it really blew up into just a huge deal for Starbucks where they had to retrain the entire company. So, that to me is a great illustration of careful what stance you take, and then when you take it, make sure that your community, your firm, your employees are along for the ride with you and understand what you’re doing.
HUBERY JOLY: It’s such an important point, Brian, because in the criteria about when and how to engage, we talked about relevancy, your purpose, your values, your stakeholders, but another criteria is authenticity. One of the things I learned from my mother, I don’t know your mother, but my mother told me, “Son, before you criticize others, look inside, look inward.” Right?
BRIAN KENNY: She didn’t say it so kindly to me, but yeah, she had the same sentiment.
HUBERY JOLY: Yeah. Right. And so, another case that we have at the school is about Nike and the Colin Kaepernick case, and of course Nike, when Colin Kaepernick was taking the knee, supported their Black African-American athletes because they’re part of the family. That’s how in many ways, Nike has grown. But then it backfired, notably because it was then realized that internally Nike was not such a diverse organization. And so for me, in this increasingly volatile, divisive environment, one of the reflections in the classroom can be, revisit the balance between saying something and doing something and revisiting the balance between looking outside and looking inside. I think that the first priority should be doing something inside, so that you take care of those in your care before you teach lessons. On the other end there’s cases where it’s actually relevant and appropriate and effective to speak up. And you have to think about the leverage you have and the risk you take from that standpoint.
BRIAN KENNY: Yeah. I was going to ask you about that. What’s the political calculation that a CEO has to go through when they’re deciding whether or not to weigh in on something? And who do they have to check with? I mean, do they have to go to the board? Is it something that they really have to … Because you said time is of the essence here.
HUBERY JOLY: Yeah. So, many questions here. So, having an internal process and as the CEO people you can go to, I know that Jeff Harmening, the CEO of General Mills, we have another case on this, following George Floyd, because of course General Mills is headquartered in Minneapolis, the first people he called were some of his Black executives and the Black employee resource group, to check in with them and see how they felt and then what advice they might have on this. So, that’s an important consideration. Now, Ken Frazier, following the incident in Charlottesville, where, as you may remember, following demonstrations, the president said that there was good people on both sides, including white supremacists and the other side. And Ken Frazier, the CEO of Merck, who is African-American and who was at the time with many other CEOs in one of the president’s advisory council, decided to step down from that council and spoke up. He had the support of his board, but he didn’t take much time. He felt that this was such an important issue to the values of his company, that they had to engage. A number of criteria to shed some light on this. First, you always have to stay true to your values, right? In these difficult moments, staying true to your true north, your values, which is what Ken Frazier did, but also looking at your leverage and the risks you’re taking. So, if you’re a consumer brand like Bud Light or Target, the risk of retaliation is higher than if you’re a B2B business. So, JPMorgan, Jamie Dimon, who’s the godfather of capitalism in this country, following some hate crimes against Asian individuals, really spoke up and spoke his mind against racism. And, so many people look up to Jamie and it’s harder to retaliate against JPMorgan than compared to orchestrating a boycott of Bud Light. So, these are considerations to take into account as well.
BRIAN KENNY: Yeah. Much of the backlash against CEOs who take positions on these things seems politically motivated. I think that’s probably a classic understatement. Does a CEO need to explain to that group why they’re doing this? Or do you just ignore that and say, “You know what? We’re taking a position. Here’s why we’re doing it and we feel good about it.”?
HUBERY JOLY: So, first communication priority, you head communication, Brian, for this great institution, is internal.
BRIAN KENNY: Yeah.
HUBERY JOLY: So, last year we had Roe v. Wade being overturned. And by the way, is that a subject on which companies should take a public stance? This is the highest court in the lands that has decided. What impact is it going to have? What good is it going to do? But certainly, having a conversation with your employees. And by the way, another lesson is, don’t wait. Be proactive in ahead of time identifying the issues that are likely to be on the horizon and impact your company and start planning for this. Don’t wait, otherwise you’re going to be on the back foot. But many companies, because of this planning had already introduced provisions in their healthcare plans to enable employees to travel across state lines to get healthcare, which was a way to assist their employees. But then internally have a conversation. And by the way, have a conversation with a diversity of your employees, because who says that the 125,000 employees of Best Buy are just from one camp, right? We have employees in all states, all walks in life. One of the new employee resource groups you should probably create that did not exist historically, is conservatives. And they’re an equally valuable member of the organization and engage them in the dialogue and try to listen. One of the great attributes of great CEOs these days is they have two ears and one mouth, and they should start by listening. And of course, listening to their heart, but also listening to those around them, listening to those who are competent on these matters. And try to do their best. And again, that means oftentimes being guided by their values and what they believe is the right thing to do.
BRIAN KENNY: Yeah. We know that, you mentioned earlier in our discussion, that the majority of people expect CEOs to take a position on some of these issues. I think we also know that the millennials they care a lot about the companies that they buy products from, and they really care about the companies that they work for, and they want those companies to stand for something. So, I’m just wondering, as a CEO, is this something that you look at as a brand enhancing choice that you make to affirm for your employees that we do stand for something?
HUBERY JOLY: And that’s why you need it to be authentic. And you and I have talked about this before, Brian, that’s where purpose comes to the forefront. What is the good you’re trying to create in the world and what are your key values? And if you’re centered around that, and of course, if the strategy and performance is derived from that, right? So, it cannot be made up and separate from the business. Then it makes a big difference because then it’s going to be authentic. So, at Best Buy, our purpose is to enrich lives through technology by addressing key human needs. And it’s a very human culture. At Ralph Lauren where I’m on the board, it’s to inspire the dream of a better life through authenticity and timeless style. And of course, one implication of that is that, of course you’re going to have a diverse organization, inclusive organization, where everybody can feel they belong. And then when something happens, you know what your true north is. So, Corie Barry, who was the CEO of Best Buy, my successor, when George Floyd was murdered, her reaction to this was, “We can do better.” Right? And we had been engaged at Best Buy for a number of years on trying to enhance our environment and create a more inclusive environment, more diverse environment. We’ve made great progress. But her sense was, “We can do better.” And that started with, what to do at Best Buy and that started also, what kind of coalition can be mounted at the state level? Because in the great state of Minnesota, and from my accent, you can tell that’s where I’m from, there’s a number of great companies and working with the governor, you can try to make a difference here. But if you’re guided by purpose and values, then good things happen.
BRIAN KENNY: We’ve seen recently, really within the last year, I would say, a backlash against ESG, environmental, sustainability, and governance, which is something that we talk a lot about at Harvard Business School. There’s a lot of cases, we’ve had them on Cold Call, about firms and investment companies that are focused on ESG, and now all of a sudden there seems to be this pushback against that. And it’s this, I think the chorus that we’re hearing is, business should be focused on business and not social issues. What would you say to somebody who throws that at you?
HUBERY JOLY: So, a number of words and concepts have become toxic and weaponized.
BRIAN KENNY: Yeah.
HUBERY JOLY: ESG is one of these. DE&I is another one. I learned from a great colleague, Francis Frei, that once a concept or a vocabulary is weaponized, you stop using it, but you continue to do what’s right. So, is incorporating external factors from all of your stakeholders, important to develop a strategy? Yes, yes, yes. And that includes, of course, your employees, your customers, your vendors, the communities in which you operate, and the planet. And of course, you need to take this into account to generate great economic performance over time. And again, if the planet is on fire, you’re not going to have a business. So, if you’re an apparel company like Ralph Lauren, taking care of the factories in Asia and what happens there, we all remember, Ralph Lauren was not at all involved in that, but the fire in a number of plants or factories in Bangladesh a few years ago. They’re not owned by Target or Ralph Lauren or Levi Strauss, these factories, but we source from them. So, making sure that you look at that there’s no child labor, that there’s safety and good working conditions in these factories. First, it’s the right moral thing to do, but also the consumers are going to go after your throat if you don’t take care of that. So again, ignore these factors at your great peril.
BRIAN KENNY: Hubert, this has been a great conversation as I expected it would be. And I usually end by asking my guests if there’s one thing you want people to remember about the case, what would it be? I’m going to ask that a little bit differently to you today, and that is, if you were sitting down with a friend who was looking at a CEO position and they were equivocating about, “Should I take this job, should I not?” What advice would you give them?
HUBERY JOLY: Well, I would say this is an increasingly challenging world, so don’t expect the job to be fun every day.
BRIAN KENNY: Yeah.
HUBERY JOLY: At the same time, if your inner purpose is to make a difference in the world, right? It’s not about power, fame, glory or money. If it’s something about making a difference in the world, companies now have the opportunity and the duty to make a big difference in the world and can contribute to solving some of our most pressing issues in the world. And I think 10 years from now, 20 years from now, maybe you’ll look at this time and you’ll say, “This was our finest hour.” And so, a lot of the conversation with CEOs and aspiring CEOs is that this can be great leadership moments, and if you’re interested in pursuing that, better take care of yourself, right? Because in order to take care of others … Remember, when we’re flying, we’re told, “If the oxygen masks come down, put them on yourself first before you help others.”
BRIAN KENNY: Yeah.
HUBERY JOLY: So, you’re going to need to take care of yourself so that you have the inner strengths and the moral compass, and then the network around you to help you do a job that’s increasingly difficult, clearly, Brian, for sure.
BRIAN KENNY: That is great advice from somebody who’s been there. Hubery Joly, thank you for joining me on Cold Call.
HUBERY JOLY: Thank you, Brian.
BRIAN KENNY: If you enjoy Cold Call, you might like our other podcasts, After Hours, Climate Rising, Deep Purpose, IdeaCast, Managing the Future of Work, Skydeck, and Women at Work. Find them on Apple, Spotify, or wherever you listen, and if you could take a minute to rate and review us, we’d be grateful. If you have any suggestions or just want to say hello, we want to hear from you. Email us at [email protected]. Thanks again for joining us. I’m your host, Brian Kenny, and you’ve been listening to Cold Call, an official podcast of Harvard Business School and part of the HBR Podcast Network.
Source : Harvard Business