Welcome to New World of Work: a podcast exploring the new frontier of the modern workforce. In each episode, we’ll hear from some of the world’s best and brightest people and culture experts on the cutting-edge topics HR professionals are most interested in today, explored through a global lens.
Episode description
After the past two years, many people have had a chance to reflect on the values and priorities they consider to be most important in life, and for a large majority of the workforce, finding a strong sense of purpose at work has risen to the top of the list. In fact, according to a recent report by McKinsey, around 70% of people say they “define their purpose through work.” In this episode, Rhys sits down with Nicholas Andreou, the Founder of Impact Edge Consulting, to unpack the reasons why being an impact-driven business has become a strong competitive advantage for companies. During their conversation, Nick explains why a strong sense of purpose at work acts as a source of value for companies by helping them attract, retain and inspire top employees, which is key in today’s war for talent. Nick has over a decade of impact experience spanning academia and impact investing, and he’s worked with stakeholders including the World Health Organization, Harvard and Big Society Capital. In this episode, he shares his perspective on the current focus on impact-driven careers, especially among younger generations, and why he believes ESG and impact factors will only become more important in the future.
Episode transcript
Rhys: Welcome to New World of Work: a podcast exploring the new frontier of the modern workforce.
I’m Rhys Black, Head of Workplace Design at Oyster, a global people operations platform making it easier than ever to build a brilliant team on an international scale.
On New World of Work, we’ll hear from some of the world’s best and brightest people and culture experts on cutting-edge topics that people ops professionals need to hear today, all through a global lens.
Join us as we navigate this new world of work together and learn more about each other along the way.
In today’s competitive job market, trying to lure in top talent with free snacks and ping-pong tables just isn’t going to cut it anymore.
After the past two years, many people have had a chance to reflect on the values and priorities they consider to be most important in life. And for a large majority of the workforce, finding a strong sense of purpose at work has risen to the top of the list.
In fact, according to a recent report by McKinsey, around 70% of people say they “define their purpose through work.” Millennials are even more likely to view their career as their “life calling,” and with this age group representing over a third of the workforce today, companies would be wise to take this information into account.
In this episode, I’m sitting down with Nicholas Andreou, the Founder of Impact Edge Consulting, to unpack the reasons why being an impact-driven business is becoming a competitive advantage for companies.
During our conversation, Nick explains why a strong sense of purpose at work acts as a source of value for companies by helping them attract, retain and inspire top employees—something that’s key in today’s war for talent.
Nick has over a decade of impact experience spanning academia and impact investing. He has worked with stakeholders including the World Health Organization, Harvard and Big Society Capital. He has a PhD in Work, Health and Policy and an MBA from Saïd Business School, Oxford University.
He kicked off the episode by sharing more about the work he does and why he decided to launch Impact Edge.
Nicholas: I'm Nick Andreou. I started out my career in academia. I was doing a Ph.D. in what is now SDG eight, so the decent work agenda. My belief was that we've got loads of problems in the world and the reason those problems exist is because we don't know how to solve them. And so I thought, right, let me go to the universities where we study how to solve problems and then all the problems will magically take care of themselves. And then as I was doing that, I realized that academia knows a lot about problems and how to solve them, and the challenge is more on the business side and the implementation size. And so I then left academia and went into business and particularly in international development, where there a lot of problems that need to be solved. And so I was working in East Africa trying to help micro-entrepreneurs who are people usually living in poverty, hustling on the side of street, selling whatever they can get their hands on. And we were helping them to formalize their businesses. So to to figure out how to calculate margins and which products, you know, make them more money and they should focus on those versus others. How did the bookkeeping, all those kind of things? And the idea was they would formalize their business, they would hire more people, they would pay taxes, they would put useful products and services out into the community. And that's how you get kind of local development. I did that for about three or four years and then decided to go back to business school to do an MBA because I wanted to sort of see what else was out there and see how to scale this kind of impact question that I had been working on in East Africa. And my answer to that was impact investing. So I jumped into big society Capital Impact Fund of Funds Investor in the UK and did that for a couple of years. Learned a lot about the investing side and how sort of capital flows work. And then most recently, I still do that part time, but have also set up an advisory company that helps startups and startup investors think more deeply about this kind of impact question. And the consultancy is called Impact Edge because the idea is that impact is now becoming a source of competitive advantage if you leverage it properly. So it's, you know, how do we bring some of those ideas into into practice with business and investors today?
I decided to launch Impact Edge because there is a broader trend in the world of moving towards consideration of social and environmental impact alongside financial metrics and performance. And so there is a need to help the world get there faster because we are we are urgently running out of time. And so when you think of all the levers that you have to get there, you have, you know, government and regulations, you have investors that put requirements on companies, et cetera. All of those things are fantastic levers. I just found them quite slow. So governments take forever and will only ever set the minimum bar for what's possible because they have to take in so many different stakeholders perspectives into account. For investors, it's the same. You know, a VC fund will make, I don't know, 30 50 investments depending on, you know, where they're investing. And it takes them a long time to do that and to influence over time the startups. And so that learning cycle and that influence cycle is quite long. With a consulting company, you get brought in to fill to fix a very specific problem and normally to short a period of time. So the pace at which you can make change and learn and iterate, I found to be much faster. And the scope with which you can do that is much bigger. And so that's why I was drawn to the sort of the consulting way of making change. Of course, I still keep one foot in the investment arena with with big society capital, and so I'm trying to leverage both. But that was really the underlying motivation.
Rhys: In many ways, we’re at a turning point in society. Major global events like the pandemic have accelerated changes that were already in motion, and a stronger focus on environmental, social and corporate governance or ESG in the business world is one of these shifts.
Climate change is another factor in the current cultural reckoning we find ourselves in. Nick helped to shed light on some of the reasons behind the current focus on impact-driven careers, especially among younger generations.
Nicholas: I mean, so there is a known trend. There's lots of data on it from Deloitte, LinkedIn, et cetera, that the younger generations care more and more about, you know, the sort of non-financial dimensions to their career. So it's not just about how much they make, but sort of less about the problems that they solved, but the type of problems that they solve and they're increasingly caring about environmental and social issues. I'm not sure exactly why that exists. I think it's something to do with awareness. So, you know, the advent of the internet, etc., we are much more aware of the problems that are out there. It took me, I think, 20 years to see extreme poverty for the first time. When I when I went to sub-Saharan Africa, I mean, today you can see it and understand it to some degree, very easily. So I think awareness is definitely one of them. I think the second is that there's huge problems that are beginning to weave their way into the fabric of society. So no matter who you are, where you are, you are experiencing these challenges in some way, shape or form. And these sort of COVID 19 pandemic is just one example of that. So that's the other issue. We are feeling them much more. But the third is also a sense of urgency. So we are running out of time to solve some of these problems and people who are the best problem solvers who typically would have gone to consulting companies or industry to solve big problems. Now they're attracted by these even bigger problems, which is, you know, how do you how do you take X amount of carbon out of the atmosphere, whatever it is? And so I think that's why people are gravitating more towards these, these types of these types of careers. In a nutshell, because they need to and they find the most fulfilling and sort of meaningful. So yeah, I think that's why that trend is happening.
Rhys: In Nick’s view, ESG and impact factors will only become more important in the future as our ideas about what it means to add value as an organization continue to evolve.
He likens this shift to the emergence of marketing and branding as a top business priority around the mid-twentieth century.
Nicholas: it's important to be impact driven because I think it will become if we're not already there, but it will definitely become in the future. The core thing that determines a company's value through all sorts of different mechanisms. And I think the easiest way to explain this is an anecdote that I heard from the might be the former chief economist, I think might still be there at Mars Bruno Roche. And he sort of said, you know, in the 1950s, all these people walked into the C-suite and said, Guys, we really have to focus on branding and marketing. Of course, at the time, 95 plus percent of a company's value was in the tangible things that sat on the balance sheet. Right. The warehouses, the inventory, whatever. And this idea of brand and marketing was something new, and nobody really understood why it was important. You fast forward to today, probably 98 percent of the value of a company is in its intangibles. Right. So so the brand value of the value of Coca-Cola is not in the inventory. It's in the value of of the brand of Coca-Cola, right? And the people who saw that transition and who you know, played it well are the companies that did well and the ones that didn't have lost, you know, market share performance or the rest of it. And so the way Bruno talks about this, which I quite like, is we're in this huge values shift of society where people will value companies in terms of choosing where to buy, how much to spend, where to work, et cetera, based on their commitment to the social and environmental world. And so if you think that in 2050, that's the biggest lever for on on improving your company's value, then it is absolutely at the core that this thing called impact is something that companies should be thinking about and solving for. And so, you know, we can go into some of those mechanisms, but I think ultimately it's that's it. You know, that's that's how you determine value in the future society, the contribution you make to social and environmental issues.
Rhys: There’s little doubt we’ve seen massive shifts in the public consciousness recently. In the business world, companies of all sizes are feeling the pressure to keep up with the changes.
However, implementing new ESG initiatives and becoming an impact-driven business doesn’t happen overnight, and the process can be downright confusing even for some of the world’s largest companies.
Nick provided a little more background to help us understand the true definitions of ESG and impact, and the important differences between the two.
Nicholas: So this is a really common question that we get. What is ESG? What is impact and how do they differ? So we have to go on a bit of a history lesson to figure out what these things are. So ESG means environmental social governance, and this was coined a few decades ago. I can't remember exactly when, and it was a group put together, including the UN, the World Bank and a bunch of asset managers to try and think about non-financial performance. And the argument was basically that if you think about these three areas environment, social and governance aspects of your business that will in the long term improve your financial performance. So there's a couple of points worth making. The first is that the motivation was inherently driving financial performance through thinking about these other issues that we don't normally think about. The second thing is that the target group was asset managers that invested in public equities. And so when they thought about what issues are most material from an environmental perspective, social perspective, et cetera, these are for huge businesses where the business model is already fixed. And so when you think about how we can improve environmental performance, it's like, Hey, let's let's have a more sustainable supply chains, or let's make sure that the waste we have in the officers is recycled or whatever it is. And so it was a very operational focus when they thought about those three areas. Then we had the advent of something called impact, which sort of sounds similar because the problems that impact investors or impact companies are trying to solve are inherently in the realms of environmental, social and governance. So it's kind of like why? Why does this new term exist and what happened there is these it came from the investing world. These impact investors want it to back companies where the core purpose of the company was to solve an environmental or social problem. And so the focus that wasn't operational, it was around the business model. So you set up a business to solve a problem rather than you have a business. And through running that business, you found a neat way to minimize your impact on a problem. And so there's a lot of confusion between these two things because they're both viable routes to solving a problem. So the example I like to give is, you know, everyone is feeling squeezed in terms of income and disposable income and inflation, all these kind of things. So you can have an organization that's core purpose is to help people increase their disposable income. It might be through, you know, job training so they can access higher paid job or whatever it might be. And that is what people would classify as an impact business because their core proposition is trying to do that. Then you can have a huge company, say Walmart, that decides to increase its wages by 10 percent. That is essentially achieving the same outcome, but through a very different operational mechanism. And so forget forget the language that exists today, this ESG idea and its impact idea. The way I like to think about it is we are interested in the outcomes that we can create for people and our planet and hopefully positive ones. And that is what I think impact is. Impact is when you make a positive contribution to people or planet and then how do you get there? Well, this thing that we used to call impact businesses, I think the right way to describe that is by saying you have an impactful business model and then this thing that we used to call ESG, I think the right way to describe that is you have impactful operations. And so ideally the best businesses will have both an impactful business model and impactful operations, and that leads to a lot of impact in terms of outcomes. But you might have either or. Right. And so that's an emerging picture that we have to understand of where it's possible to have both, where you know, you might have very impactful business model, but less so on the operations. Or you might have very impactful operations, but less so on the business model.
Rhys: When it comes to the war for talent, impact is becoming one of the most important tools companies can have in their arsenal to stay competitive.
Nick helped to illustrate this with some real-world examples that reveal humanity’s collective desire to make a difference in the world.
Nicholas: I think businesses, especially younger businesses, the talent piece is really important. And so the question is how do they attract, retain, motivate the best talent? And you know this the talent war is real, and this thing popped up again on my LinkedIn. Instacart took, I think, 40 percent write down on their valuation, right? So that the stock options that they're offering employees are worth more. And they say that's true to attract talent and retain talent. And that is that that has huge financial implications for them and their investors and all the rest of it. And then you read about all these trends where people are leaving these traditionally super attractive jobs, you know, consulting companies, investment banking, et cetera, to go into impact driven companies at significant salary discounts, I imagine, and you realize that that is a huge competitive advantage you have as a company to attract the best talent. So, you know, execs leaving companies like Facebook or whatever to join some younger startups because they are mission driven. I think that demonstrates the value that being mission driven or impact driven has to do that sort of attraction piece the retention piece. I think it's more about your day to day experience. If you are fully aligned with what the company is trying to do, you believe in it, it excites you. You're going to hang around, right? As long as you know you're not making tradeoffs in terms of the financial center, but you're going to feel so inspired and empowered by what you're doing that you're going to want to have that experience day to day. And so you will stay. And I think it goes back to that tht conversation we touched on briefly before, which is, you know, if you want to be solving the biggest problems, these are the biggest problems of our of our time. And so the best talent will be attracted and want to stay with solving these types of problems. And so I think that's how the the retention piece plays out. Also, I have another hypothesis which is potentially just flawed, but I tend to feel like the working dynamics in companies that are very impact are mission driven tend to be better because there's this sort of sense that we're doing this for more than ourselves. And so it's just a sort of feeling I have when I work with these companies that the culture and the teamwork is so much stronger and better that some of these other companies where the purpose is is around making as much money as you can kind of thing. So that might be another reason why people, people stay. It's not just the purpose, but it's also the fact that the belief that you're building something with this group of people that will make the world a better place. And then in terms of the motivation. Um, so I've experienced this at times in my career, but it's that that idea of, Maslow's hierarchy of needs, right? It said at the top of the pyramid, the self-actualization, you know, very rarely in your professional career would you have a chance to say, this is the thing that self actualize is me. But if you're doing something that you know is very mission driven, is clearly making the world a better place. You get that sense of inspiration every day. And so, yeah, it sort of stands to reason that you will be more productive, more creative, you know, more efficient because there's a reason why you're putting all of that into your work. And it's this reason that sort of slightly bigger than you. Um, so yeah, the talent piece is one of the areas that I think we understand the most clearly why being impact driven leads to sort of business benefits. And, you know, if you ask CEOs or hiring managers, they can give you very clear examples of some of these things playing out. And so, uh, I think I think it's exciting that we begin to understand this more because that will continue to be a significant lever for getting people to think more about impact.
Rhys: Not only will impact-driven businesses succeed in the war for talent, but they’re also more likely to do better in areas like diversity and inclusion, decision making and more.
Whether you believe in the law of karma or not, it’s evident that doing good in the world ultimately pays dividends.
Nicholas: So there is this idea and we're beginning to get some evidence behind it that impact driven companies tend to make better quality decisions over time. And that means that they suffer fewer risks or they suffer the repercussions of risks to a lesser degree, which therefore affects their their, um, longevity. And the interesting thing is what is going on there? How does that play out? What are the mechanisms? And there was a few that sort of come to mind. One which sort of mentioned there is the quality of decision making. So what makes a better decision? Diversity, diversity of inputs and diversity of processors for lack of a better term. So if you're only thinking about financial performance and financial drivers, then that's only one lens to look at a problem. If you're also thinking about environmental and social issues, when you're making this decision, suddenly the things that you're thinking about when you make this decision are more and just that means that you're thinking about more things and more likely to come to a better decision in impact driven businesses. You also tend to have more diverse teams because often you bring people into your organization who have experience that in problem in many different ways. They might have, you know, studied it from an academic perspective. They might have lived it, they might have run businesses in it, et cetera. So you get these different perspectives. And that diversity of processors means that not only do you have more diverse and a higher number of inputs into the decision making, but you have a more rigorous process by which you filter that information and come to what is ultimately a higher quality decision. And some of these elements have been very well proven in academia, so we know that more diverse teams, you know, sort of scientifically quote unquote make better decisions. And so some of that stuff is pretty well, grounded. The other thing that I think is interesting is that you are also much more likely to be attuned to your customers because a core feature of being an impact driven business is you listen. That's why you're trying to solve a problem that not many other people are trying to solve is because you've put your ears and eyes out into the world. You've seen something that's broken and you're trying to fix it. So that characteristic about you means that you are more likely to hear and see things further down the line. So you're more likely to pick up risks earlier, but also come to creative, innovative solutions about how to avoid some of those risks in the future. And I think there's a third reason is around this idea that, you know, businesses operate in a game and, you know, there are rules of the game and those rules are set by people in terms of implicit rules are set by governments in terms of explicit rules, et cetera. And so if you are doing something that is inherently impact driven, you are much more likely to stay within the rules of the game as those rules change. So we have very clear examples. You know, one guy in the UK being sort of payday lender that many people would say was was exploiting people who had these liquidity issues and needed money today rather than at their payday. And essentially, the UK government came in and put caps on on interest rates that made their business model not viable anymore, and they essentially went out of business. Other competitors, they decided to leave the UK market, et cetera. So the government's there changed the rules of the game and the impact driven businesses that were operating in that space thrived. And the ones that weren't, they didn't. They either closed down or left the market. And so I think that's another angle that means you're sort of more insulated from risks in the long run. So I think it's sort of the decision making process, what feeds into it, the quality of decisions that you make your ability to to horizon scan if you like and be aware of the risks that are coming, but also to use the broader community's insight for how to solve some of those challenges. And then the third one is sort of staying within the rules of the game. Um, yeah, that's why I think these companies tend to last longer and do better over a longer period of time.
Rhys: To conclude this episode, I asked Nick to share what’s next for him and the world of impact, as well as his answer to our favorite question here on New World of Work: what’s the best mistake you’ve ever made?
Nicholas: I think some of the really exciting stuff is, is what I'm calling kind of infrastructure for the ecosystem. So, for example, in the world of business, everything is interpreted through benchmarks. So you've judged your performance as an investor, as a company or whatever relative to your peers or other standards out there. We just don't have that for impact at all. You know, somebody says to me, our company has launched a product that helps people save whatever it is, 50 pounds a year on X. And the first question in my head is like, Obviously, that's good. But how good is that right? Is there another company that's doing 100 pounds? Is there another company that's doing a thousand? We have no idea. And so it becomes very, very difficult actually to judge performance, relatively so. I think that's one thing that absolutely needs to happen. Benchmarking and sort of standardization of performance. Another thing that needs to happen is we need to get much, much better at understanding unintended consequences or risks of some of the things that we're trying to do. If you go back and look at some of the tech companies that have got a bit of flack for unintended consequences, the likes of Facebook and sort of fake news and all that kind of stuff. Even Airbnb and its effect on on, um, on house prices in areas where there's a lot of Airbnb activity, all that kind of stuff. If you go back and look, they had a very impactful missions when they started, they wanted to solve social problems. And so of course, the way that you disrupt the systems is it's so complicated and it's impossible to know what the unintended consequences are going to be when you start. But it's how do we get better at setting up systems that do this kind of horizon scanning thing so that as soon as this unintended consequence happens, you can pick up on it and you can make sure that you solve for it in a productive and useful way. The third piece, actually, that I can't believe I didn't start with, but it's probably the most important thing relates a little bit to the first one. But it's the standardization of what we mean when we say impact. So accounting, which is, you know, how we define financial performance, is 7000 years old, according to Wikipedia. You know, the source of all truth, impact, measurement or quantification or whatever we call it is only been around at a stretch for sort of 70 years. And so we have a lot to catch up on. And so things that accounting enables you to do to compare Option A, Option B to think about, you know, discounting future value to today's value so that you can make informed long term decisions about, you know, priorities, all these amazing things that we've done with accounting. You just can't do with impact. And so we absolutely need to make more progress there.
What's the best mistake I've ever made? I would say the best mistake I've ever made. And sometimes it was out of necessity rather than choice, but was to just to suspend the beliefs that I had about the world, that those core beliefs that, you know, they help you to give meaning to the world and try and see something from a different perspective and that unlocks tremendous possibilities and things. And so, you know, if you'd have asked me as a child whether I would end up working in some of the countries that I worked in, I would have said, definitely not. But you know how I ended up in East Africa. A friend of mine convinced me that climbing Mount Kilimanjaro was a good idea, as I said, a summer project. And that's not something that I would normally do in a country that I would normally go whatever. But I just sort of suspended some of those beliefs and said, You know what? Let's just go and see what happens. And it's when I sort of came into contact with extreme poverty that I then started having all these questions like, how does this even exist? How have we created a global society where this exists? And so that really had a big influence on where I then took my career. And so looking back that that was something that was quite meaningful. So I constantly trying to remind myself of that, you know, sometimes doing things that you would never do if you go into them with an open mind can often unlock a whole new realm of possibilities for you. And so I try to live with that in a genuine way make a lot of mistakes because they might teach you something that you don't know. So it's hard. But sometimes I get it right.
Rhys: My conversation with Nick serves as an important reminder of the need for more impact-driven businesses in today’s world. Here are three key insights I’ll be taking away following this episode:
- First, just as business leaders of the twentieth century discovered the tremendous value that marketing and branding could bring to an organization, we’re beginning to understand the crucial role played by impact across industries. Our society is in the midst of a transformation, so it’s becoming increasingly important to consider the mission and purpose behind our actions in the business world.
- Second, being an impact-driven business is beneficial for a myriad of reasons. Aside from the obvious fact that impact-driven businesses are working to create a better society, these companies will also see greater success when it comes to increasing revenue, attracting and retaining talent, and overall, staying around for longer.
- And finally, Nick reminds us that impact is a relatively new area for the business world, and there’s more work to be done around benchmarking and measurement tactics. As a collective, it will be important for us to align on a shared definition of impact so we can measure our progress more accurately going forward.
Rhys: Thank you for listening to New World of Work, the podcast exploring the new frontier of the modern workforce through an international lens. We hope this episode served to expand your horizons and open your mind to a new perspective.
Be sure to subscribe, rate and review the podcast so we can reach more listeners.
I’m your host, Rhys Black. See you next time.