Listening: A Strategy and Change Blog | Hosfeld & Associates

Organizations Can Experience the Stress of Change When Implementing New Branding or Marketing Strategies

The dynamics of change are challenging for any organization.  Whether reacting to change or initiating change, the ambiguity and fear of the unknown that go with change create anxiety.  It’s made worse when leaders don’t acknowledge that the experience of change is as important to manage as the actual mechanics of doing business differently. The change doesn’t have to be a merger, down-sizing or process engineering to have significant impact. It can be as simple as creating a new marketing program.

In my work helping clients to explore, identify and implement new marketing strategies I’ve seen the effects of change in a variety of circumstances:

• Addressing declining revenue in a down market
• Implementing a new marketing plan during the transition of senior leadership
• Adopting a new brand strategy as the CEO made unannounced plans to leave
• Developing a new strategic direction when an artistic director and an executive director were fighting for control of an arts non-profit

The lessons that are emerging from these and other experiences reinforce a number of best practices of change management. Emotionally-intelligent and systems-oriented practices help carry organizations more successfully through change.

See the Whole System – A systems perspective is one that recognizes that our current situation is the result of the interaction of multiple elements. There are many lenses through which to see and define the elements of a system. One, the integral model, suggests that there are subjective and objective aspects of human systems. Objective elements are those that can be demonstrated and observed. Subjective elements are thoughts, beliefs and feelings.  Many organizations seek to drive change by attending only to the objective elements. Increasingly however, they are finding that success comes from attending to the subjective ideas, beliefs, passions and perspectives taken by individuals and shared culturally. Attending to those subjective areas – the “soft” stuff – means taking care of the emotional side of change.

William Bridges is known for his simple but useful model that highlights the emotional challenges of change. Organizations beginning a change start with an Ending. From there they move into a Neutral Zone where there is an intentional effort to move to a new end goal. Arrival at that end goal constitutes a New Beginning.

For organizations or individuals who have had change forced upon them, the first phase, Endings, is a phase of grief and loss. Time must be spent at this stage of change to recognize what is ending, and notice what is not ending.  For those who are initiating the change, there may be less unwanted loss, but something must be given up in order to move forward. As painful as this time can be, the next phase, the Neutral Zone, can be even more challenging. In the Neutral Zone, we enter the unknown, a time of new learning, where risks must be taken to find solutions that take the organization toward its goal.

Acknowledge and Mitigate Anxiety — Organizations facing the unknown experience anxiety. The members in these organizations act out their anxiety in a variety of ways. Finger-pointing, blame-shifting, detachment, passive aggression, aggression, and scapegoating are among the behaviors that show up in the Neutral Zone. Trust, or lack of trust, can be a significant factor in change. Many are suspicious of who is behind the change and who will benefit the most. A lack of clear leadership will bring out aggression as individuals seek to impose a sense of order. Perhaps most important to notice is a tendency to personalize the anxiety of change and make friction or problems experienced in the change process a particular individual’s fault.

A variety of techniques can be used to address these behaviors if they arise during the implementation of a new marketing strategy or program. Perhaps the most important step to mitigate anxiety is openly acknowledging it and providing safe places for that anxiety to be expressed.

Leadership Sets the Tone – How is the top leader (or leaders) in the change reacting? Are they anxious? Are they risk-averse? Do they love learning new things and taking on new challenges? If the leader is anxious, the organization will be anxious. If the leader is not clear, his or her direct reports will be unclear. They will believe he or she has a plan and just isn’t telling them what it is. If the leader feels comfortable taking risks and making mistakes, he or she will make that okay for everyone else. That’s important because transformational and adaptive change means stepping into the unknown. Mistakes will be made. That’s how we learn the new way.

So, leaders in change must be aware of their own receptivity to change. Those that are anxious should find outside resources for support and not expect emotional reassurance from their employees. Those leaders who thrive in change need to be sensitive to those who are less comfortable and not label them as “the resistance.”   Frequent communication about the change, clarifying where the organization is in the change process, and providing hope for a positive outcome are some of the greatest gifts leaders can give in a transition.

A more detailed unpacking of the Bridges model will provide additional insights for organizations going through change. John Kotter’s model for leading change in organizations also provides a series of action steps leaders can use to address the points above as they plan and manage the change.

Periods of economic uncertainty and transition place greater demands on organizations to engage in adaptive change processes. As a result, the idea of “what really works” in strategic planning has changed dramatically in the last 15 years.

Added to this are increased employee expectations for engagement, collaboration, and the opportunity to create positive social and environmental outcomes through their work.

• What really works in strategic planning?
• What must clients do to ensure a high quality process and outcome?
• How do we build progressive values for success and meaning into both the strategic planning process itself and the resulting strategic plan?

What Really Works In Strategic Planning?

Following we provide insights about what works in strategic planning, followed by some of the reasons traditional planning may have failed in that regard.

When the strategy is clear to everyone. Strategy needs to be simple enough for anyone in the company to understand.

• Avoid top-down approaches. Many organizations suffer from planning that goes on at the most senior level of the organization and doesn’t integrate wisdom from “the front lines.” Top-down planning also suffers as a result of a lack of understanding and buy-in. The most effective approach is one that combines top-down and bottom up approaches.

• Numbers aren’t the whole story. Strategies that are about hitting particular financial targets alone aren’t really strategies. Financial targets are goals that we want the strategies to deliver.  A strategy is the mobilization of company-wide efforts needed to create the desired outcomes. Financial targets are the “what.” Strategies are the “how.”

• Create shared language. The language of the executive office is often financial, but that doesn’t “translate” very well in other parts of the organization. Using planning tools that create shared language in all departments and levels of the organization helps make the strategy clear.

The strategy is resilient. One common critique of strategic plans is that they are obsolete as soon as they are written. Resilient strategies are based on organizational strengths and assets that have long-term strategic potential.

• Avoid strategies that are “borrowed” from other companies. Some companies try to copy what they see working for their competitors or peers in their industry.  While great ideas can often be picked up from others, successful strategy is based on the unique assets and strengths of each organization.

• Base strategic plans on long-term opportunities, not short-term trends. A very common practice in organizations is to mistake tactical strategies for strategic planning. A short-term market opportunity then replaces organizational mission and strategy. Without balancing short-term and long-term, the organization short-changes itself on profitability and risks creating a culture driven from one crisis to another.

The strategy is fully implemented. Many organizations create reasonable strategies that are not fully implemented. When this happens, one of the following may be occurring.

• Invite people into agreement with the strategy. If the strategy process has not sufficiently included key perspectives in its development, the outcome will likely have opponents. Strategy processes that integrate differing views ultimately create stronger outcomes.

• Translate the strategy to day to day work. For many, the intuitive process of figuring out what strategy means for their work is fun and challenging. For others, it’s asking them to do the impossible.  Creating measurable action steps, and in some cases, metrics and financial targets, is a critical step in strategy implementation.

• Role model at the executive level and follow through. In order to give the strategy a chance, there has to be managerial commitment and follow-through. If the strategy was developed without their buy-in or if the strategy is not robust enough, managers will become fearful that it doesn’t address the reality of today’s challenges. If they face resistance because key perspectives weren’t addressed in planning, they may lose the will to enforce it. If no one seems to get the strategy, they may become frustrated and conclude the strategy “doesn’t work.”

The Client’s Role in Getting a Good Outcome?

Robust strategies that help organizations become more successful and profitable require quality input from the client.  Clients need to consider carefully if they can make these commitments in order to get a better outcome from a planning effort:

• Will you commit a reasonable amount of time? Although many processes take too much time and cost too much, it is also true that you can’t craft a robust, fully articulated organizational strategy and action plan in a weekend retreat with a SWAT analysis and a brainstorming session.  A reasonable amount of time for strategy development is 6 to 9 months. This time frame allows for comprehensive organizational and competitive analysis, as well as client research. During that time, the strategy process should not bring day to day activity to a halt. Rather, the process should feed new information into daily operations on an ongoing basis.

• Will you create opportunities for participation at all levels of the organization? Finding appropriate ways to tap the genius of the entire organization are essential to crafting practical, doable strategies and engaging the entire organization it their implementation.  Strategy design isn’t necessarily a consensus process, but there must be broad input and dialogue. Some of the best strategies and innovations are “stumbled upon” in the initial stages of planning. They sometimes are small, unnoticed or under-valued aspects of the organization that only emerge with broad participation.

• Will you ask clients or customers what they really want? Committing the time and money to conduct client research is essential to strategy design. The primary sources of break-through innovations and thinking are efforts that solve clients’ problems in new and unique ways.  WE all have our own standards of what quality or good work means. It’s important that we not mistake that for what customers or clients truly value. One of the key elements to sound strategy is focusing on what creates perceived value for clients. The only way to find out what creates perceived value for clients is by asking them. Without research, strategy making devolves into guesswork.

Creating Both Success and Meaning Through Strategy

“A path without heart is never enjoyable. You have to work hard even to take it. On the other hand, a path with heart is easy; it does not make you work at liking it.”
-    Carlos Castaneda, The Teachings of Don Juan

Employee loyalty and enthusiasm are two of the greatest strategic assets of any organization. We tap the potential of these assets when organizations serve a purpose that creates meaning for their work.

Organizations can create meaningful engagement in the ways they conduct strategic planning exercises, as well as in how they incorporate values and mission in the resulting plans.

Strategic planning processes can create anxiety and uncertainty, over and above that generated by the changing dynamics that make the planning process necessary. The following elements can help organizations bring out the best in their people as they go about strategic planning processes.

• Collaborative Engagement – Creating opportunities for engagement, dialogue and input from all levels of the organization is essential to creating understanding of and support for strategic plans. It is also the primary way to tap the genius within the organization to find its own solutions.  While we do not conduct planning from a consensus model, we do design ways to get engagement and information efficiently and in ways that make participants feel heard and valued.

• Build On What’s Already Working – Focusing the organization on what’s working creates hope and a foundation upon which to build new strengths. What do clients or customers already really appreciate and want from the organization? What’s the opportunity to leverage existing strengths and capacities for further growth? What are the “stumble upon” initiatives that are working that can be amplified?

Additionally, strategic planning offers an opportunity for organizations to step back and integrate social and environmental values and opportunities into the core business. In 2008, almost 60% of companies surveyed by McKinsey and Company reported that they were integrating environmental and social missions into their core strategy to a greater degree than they were five years prior. Although cost savings and new marketing opportunities motivate some of these initiatives, such practices also attract top talent. “Recruitment and retention consultancies like Kenexa, Hewitt Associates, Robert Half, and Towers Perrin have published figures demonstrating a link between environmentally friendly workplaces and engaged employees,” writes Andree Iffrig, author of Find Your Voice at Work: The Power of Storytelling in the Workplace (Limegrass 2007). Environmental and social values pave the path with heart that employees want to walk.

“After” Approaches Emphasize Stakeholders, Systems Perspective and “Third Way” Thinking

By Kathleen M. Hosfeld (with Jenny Mish)

Thousands of sustainability oriented startups are creating game-changing innovations in products, services, industry partnerships, supply chain management and more as they seek to integrate values of social justice and environmental stewardship into their business practices.

As startups, they represent one part of the new sustainability economy. The other side is existing “traditional” businesses seeking to integrate sustainability into both the culture and business processes at the same time. For the former group, the challenge is making it work without a roadmap. For the latter, it’s creating change in systems that seem to have worked “just fine” before sustainability came along.

Until recently, there hasn’t been much recognition of the role that marketing can play in furthering sustainability. Superficial promotional claims of green characteristics of products and services in the 1980s — what’s now known as “green washing” — actually created something of setback for the sustainability movement. Today, marketing functions – such as product design or supply chain transparency– that are critical to success may not – in some organizations – have been seen as part of marketing.

As more organizations have succeeded in integrating sustainability, marketing researchers and people in the field are noticing an emerging picture of what sustainability oriented marketing looks like.

Jenny Mish, a doctoral candidate in marketing at the University of Utah, and I saw the outlines of this emerging picture in data she gathered as a part of her doctoral work. She completed a study of “Exemplary Triple Bottom Line Companies,” in the summer of 2007. She identified several themes emerging as characteristic of marketing in sustainability oriented companies:

• They view their situations through a complex, systems perspective – highlighting interrelationships of components and stakeholders
• They take a long-term triple bottom line approach – finding third-way solutions instead of creating trade-offs between goals
• They engage a broad array of stakeholders
• They integrate full-cycle product (or service) costs into their understanding of what creates value and relevance for customers
• They emphasize relational, trust-based communications and sales approaches

Many of these organizations express these characteristics as “authenticity” – saying they reflect their values (“This is who we are”). Comparing Jenny’s interview data with my consulting experience in the field, we have created a series of polarity diagrams that demonstrate the contrast between marketing that is not at all sustainability oriented and marketing that fully embraces sustainability. This comparison begins to create some guidelines for those companies who want to practice sustainability oriented marketing. This offers a picture of what they might or should be striving for.

Marketing “Before” And “After” Sustainability

This series of three diagrams contrasts a simplistic, single-bottom line oriented approach to marketing with a complex, triple-bottom-line approach to sustainability marketing:

• It’s important to stress that the two ends of the spectrum do not exist in pure forms. The right side of each diagram actually represents a collage of sustainability oriented marketing“best practices.”
• We suspect that lower profitability on the left side is the result of a more limited marketing skill set that coincides with a simplistic approach.

Figure 1. Managerial Orientation

To make a transition to sustainability oriented marketing, the values and perspectives of sustainability must be reflected at the top. Although some studies show that sustainability efforts can “start from the middle,” – marketers need agreement and support from other managers to make sustainability a
priority. Without this, the pressure on marketers to drive only short-term sales targets will create either/or situations where marketers are forced to choose between profit and sustainability goals. Figure 1 contrasts the managerial orientation of the two ends of the spectrum.

Figure 2. Relationships with Stakeholders

What we see in organizations that make this transition is that at some point the expectation of the marketing function flips. The extreme polarity on the left represents marketing as strictly the job of “selling.” (Again it’s important to stress that the two ends of the spectrum are not descriptions of actual businesses, but rather extreme points of view.) At some point, exemplary organizations pursuing a triple bottom line demonstrate a perspective that marketing is the stewardship of relationships in the context of assumed reciprocity. They certainly don’t remove the sales imperative from the table. However,marketing is charged with accomplishing the goals of the organization for sales, profit and mission by providing superior benefit and relevance to not just customers alone but also to other stakeholders.

Figure 2 depicts the key relationships of which marketers become stewards in a sustainability oriented setting.

Figure 3. How Stakeholder Relationships are Stewarded

The final figure demonstrates how various aspects of marketing practice – from budgeting to research to pricing to promotion – change in character when the purpose of marketing shifts from “selling stuff” to “stewarding relationships.”

What we notice in this chart is that a much higher degree of marketing sophistication is required to practice marketing from a stewardship perspective. For example, whereas many organizations do not have a defined approach to pricing – for example, they price intuitively based on what the market will
bear – sustainability oriented organizations must develop the capacity to measure the full cycle cost of a product or service and base their pricing accordingly.

The approach to market intelligence or customer research also changes. On the left, consumers are studied so that their needs can be addressed in sales and promotion. Sustainability oriented marketers, on the other hand, seek to foster ongoing dialogue with customers and other stakeholders. It’s considered a continuous conversation, where even “co-creation” may take place when that is valuable on both sides.

Another characteristic that was noted from Jenny’s study is that in sustainability oriented marketing, marketing functions and expertise are dispersed throughout the organization. Marketing – or rather stewardship of stakeholder relationships – is “everyone’s job.” It’s important to note that many companies who haven’t consciously adopted sustainability principles yet practice a high degree of ethics and have high standards for authenticity and trust in customer and other stakeholder relationships. We sense that these companies are well placed on the continuum toward the right hand side of the polarity diagrams even if the ideas of social justice and environmental stewardship are not yet part of their corporate consciousness.

What Does All This Mean?

For those companies who are already embracing sustainability, this comparison of “before” and “after” may identify new areas to deepen their practice. For those who are just getting started, leaders in organizations may want to take note of the following:

• Marketers need to be supported in integrating sustainability and its values into their practices. They may need to be challenged to hold financial, social and environmental goals simultaneously. Or they may need assurance from the top that the company is serious about measuring success by all three.
• Marketers may also need to be challenged to think and act from a systems perspective. They need to be supported and trained to look for “third way” solutions rather than seeing multiple bottom lines as areas for trade-offs. In the end this may pay off in innovation. The ability to hold multiple objectives simultaneously and search for the “third way” has led, in the past, to new products and services, as well as more efficient manufacturing and delivery systems.
• The overall marketing skill of the organization must be enhanced. Marketers should receive professional development in areas where they may lack experience. A sense of “stewardship of relationships” should be fostered in the company as a whole so that sustainability oriented marketing becomes “everyone’s job.”

A “printer friendly” version of this article, with larger graphics, is available here.

By Kathleen M. Hosfeld, President

Recently, as I was browsing the “management” books aisle at a favorite bookstore, I pulled down a book on marketing and opened it to the first chapter. “Marketing is war,” the author wrote. Furthermore, he said, if the reader didn’t have the stomach for war, then “get out.”

We live in an interesting time in which the structures of one era exist side by side with those of a new one that is emerging. On the one hand we have the “business as machine” and “marketing as war” metaphors. In the early days of the corporation when people were trying to get their heads around how to direct large workforces – which were new to their experience – the only reasonable comparison was the mobilization of troops and resources for war. At about the same time, people were trying to make management and the enhancement of human work performance into a science.That meant breaking down work roles into components, isolating variables and trying to measure them for potential improvement.

But a metaphor is just a lens. Sometimes it doesn’t help us to see all that we should in a situation. Sometimes it colors our perceptions in ways we don’t want. In the last several decades many have been looking for metaphors that reflect the more dynamic aspects of organizations, markets and economies – the parts that seem to elude our attempts to control them. They are looking for metaphors that are more comprehensive than war.

One metaphor to explore is that of “marketing as a garden.” Many have suggested that economies are living systems and bear resemblance to dynamic ecosystems. Let’s make a distinction between a wild ecosystem and a living system that has been shaped by human intention. A garden is a living system that exists because a human being or human beings created it. While we don’t have control over all the dynamics in the garden, human influence determines a great deal of what occurs. Our organizations, markets, industries or economies might be considered gardens shaped by human actions, but still influenced by forces outside human control.

Two interesting ideas emerge when we consider the idea of marketing as a form of tending a garden:

There Are No Departments in a Garden

First, when we look at the dynamics of a living system, we discover that it’s difficult to completely separate all the processes at work into discrete boxes. Managers today tend to make artificial distinctions between marketing and management, finance, manufacturing, research and more. The distinctions will depend on how one defines marketing itself. Let’s assume that our definition of marketing, for the moment, is the actions of an organization to attract and keep customers. We could say that price-setting is a marketing function. But frequently a marketing decision is also a management decision. Price-setting is determined in part by knowledge of what the customer can and will pay. But it is also a management decision that has to reflect the costs to produce and the company’s goals for profit. Product development is another example. The design of a product impacts the customers who will be interested in it; it’s a marketing issue. It’s also a management and manufacturing issue.

The choosing of which customer segments/markets to enter is often reserved for senior management and strategists. This can also be a marketing decision; marketers have experience in the field that helps determine which segments are the best fit for the company’s strengths. Marketing is actually a set of complex, interrelated actions/decisions taking place within a dynamic system. This is mirrored in the nature of living systems, where various natural “sub-processes” serve multiple functions – those that can be compared with marketing and those that are more “management” functions.

One conclusion that can be drawn, and has been drawn already by theorists, is that a system view of business means that marketing can’t be separated from management. The silos we have created between marketing and other organizational sub-systems are artificial distinctions that actually impede interaction needed for the optimal health of our garden/our business.

“Too Much Alike” Increases Intensity of Competition

A second interesting idea comes when we consider the nature of competition in a living system. As some have sought new metaphors of organization, they’ve thrown out the idea of competition completely and replaced it with the ideal that all companies should just “get along” and collaborate. If we look at living systems, however, we have to accept that competition is a fact of life. Only just so many organisms can be supported by the resources found within the boundaries of a specific ecosystem. Only just so many companies can serve the same set of customers with a similar product.

What we find in living systems, however, is that the more similar two competing organisms are, the more intense their competition. Conversely, the more differentiated two competing organisms are, the more likely it is they will achieve an equilibrium that allows both to prosper. In business, we see this when two companies operate too similarly and offer the same essential product or service – they  compete more intensely. Companies that do not compete head-to-head are more likely to peacefully co-exist, or even partner, with others in their marketplace. This second lesson from living systems underscores the need for organizations to develop and sustain strategies that set them apart in ways that are meaningful to customer.

These two implications are likely just a starting place for cultivating the metaphor of the garden. What can you see through this lens? Plant the idea in the back of your mind and see what sprouts.

Note: Some of the ideas within the following journal articles contributed to this essay: The Anatomy of Competition, by Bruce Henderson, Journal of Marketing; and General Living Systems Theory and Marketing: A Framework for Analysis, by R. Eric Reidenbach & Terence A.Oliva, Journal of Marketing.

By Kathleen M. Hosfeld, President

Once a year or so, my mentor and former professor, Cliff Rowe, asks me to return to Pacific Lutheran University to speak to one of his classes about communication ethics. I sit in front of a classroom of about 20 students who have varying degrees of interest in how I apply ethics to my work. Most are polite. Some fall asleep.

In recent years, the students have started asking if I use the TARES test in my work. I always have to say I don’t, because I didn’t learn the TARES test, which was published in 2001, when I was in school. But, in fact, the philosophy of the TARES test is reflected in everything we do at Hosfeld & Associates.

What is the TARES test? It’s a five-point test for what the authors call “ethical persuasion.” Published by Sherry Baker, a professor at Brigham Young University, and David L Martinson, of Florida International University, the TARES test seeks to establish robust principles for ethics in action and to support the creation of a more ethical approach to persuasion – particularly commercial persuasion such as takes place in the marketing process.

The TARES test consists of five principles: Truthfulness (of the message), Authenticity (of the persuader), Respect (for the persuadee), Equity (of the persuasive appeal) and Social Responsibility (for the common good). The authors offer checklists of questions for each of the five principles that help the practitioner explore their implications:

Truthfulness examples:

• Is this communication factually accurate and true..? Does it lead people to believe what I myself do not believe?
• Has this appeal downplayed relevant evidence?

Authenticity examples:

• Does this action compromise my integrity?
• Do I feel good about being involved in this action?
• Do I truly think and believe that the persuadees will benefit…?

Respect examples:

• Is the persuasive appeal made to persuadees as rational, self-determining human beings?
• Does this action promote raw self-interest at the unfair expense of or to the detriment of persuadees?
• Am I doing to others what I would not want done to me or to people I care about?
• Do the receivers of the message know that they are being persuaded rather than informed?

Social Responsibility examples:

• Does this action take responsibility to promote and create the kind of world and society in which persuaders themselves would like to live with their families and loved ones?
• Have I unfairly stereotyped constituent groups of society in this promotion/communications campaign?

There are many facets of the TARES test worth exploring. One of the first that strikes me is that ethical persuasion begins with the realization that our choices create the world we ourselves live in. This is not a new insight; it’s been part of mainstream marketing thinking for a while. One of my first positions in marketing communications was with an Ogilvy & Mather division where I was introduced to the philosophy of advertising pioneer David Ogilvy. A prolific author, Ogilvy once wrote in a treatise to young advertising executives: “The customer is not an idiot; she is your wife.”

I was startled the first time I read it. It took a moment to sink in. Ogilvy was speaking at the time when most of the industry was populated by white males. We can pardon him some 1960s sexism because he got the basic idea right. He may have gone on to say “Or your mother, or your daughter.” He was trying to tap the innate empathy we have for people we love, for whom we want the world to be a good, safe and equitable place. He was trying to make the connection between what we do as persuaders and how that affects the world.

The TARES test is described as five principles of ethical persuasion. It’s been my experience that discussions of ethics and what is ethical can be interpreted from the perspective of compliance. We set ethical codes in order to define the minimum standard of acceptable behavior. One of the things I like about the TARES test is that it flips this into a creative discussion. Instead of setting a minimum standard it sets one of the highest possible. It asks the questions: “What kind of world do I want to create for myself and people I care about? How can my marketing choices help create that world?”

So, consider the TARES test and how it applies to your advertising, sales materials, media relations – in short, all marketing speech. Let it spark your imagination as to the kind of world you’d like to create with your work. To learn more, you can order the original scholarly paper (an easy read that includes all the questions), from Lauren Erhlbaum Associates Online: http://www.leaonline.com Title: The TARES Test: Five Principles for Ethical Persuasion.

By Kathleen M. Hosfeld, President

Anyone involved with non-profits – as an employee or board member – is concerned with their long-term financial sustainability. Increased competition among non-profits combined with declines in government funding and changing patterns in personal philanthropy have forced many to look at new sources of income to stabilize or strengthen their bottom lines.

Enter the concept of social enterprise. Technically, both for-profits and non-profits can be social enterprises. The new definition of social enterprise, adopted by the Social Enterprise Alliance is: “An organization or venture that advances its social mission through entrepreneurial, earned-income strategies.”

But, as Alliance board member Kirsten Gagnaire pointed out during the organization’s April 2007 national Gathering, for-profits that start out with a social mission (think Flexcar, Great Harvest Bread Company, Seventh Generation) frequently have the inherent entrepreneurial strengths to figure out how to balance mission and profit. Non-profits that have historically seen the world through the lens of those without ability to pay have unique challenges in learning how to court those who can.

Social enterprise is not a new phenomenon. Since the early 90s, our firm has worked with visionary non-profits seeking to change the traditional industry ratios of earned to unearned income. In the Pacific Northwest, there are a number of highly successful social enterprises including Pioneer Human Services and FareStart. Nationally, Goodwill Industries has been pursuing social enterprise since it was founded in Boston in 1902.

Today, more nonprofits than ever before are exploring models of social entrepreneurship in order to survive financially – as well as to expand their mission. Types of ventures include:

• Developing mission-based products or services for those with ability to pay
• Creating curriculum or training programs for sale or license to share core expertise
• Enhanced corporate sponsorships – treated as earned income rather than corporate philanthropy
• Retail or internet sales of donated, low-cost or mission-based products, and
• Partnerships with corporations such as cause-related marketing campaigns.

Social entrepreneurship brings new tax and legal questions. When is earned income taxable? What activities threaten our non-profit status? For visionary social entrepreneurs there’s the challenge of financing growth. Where do we find patient capital to either start a venture or bring it to scale? For many non-profits there’s the difficult cultural shift from working only with those without ability to pay to working with people who can pay. How do we do that without feeling like we are “selling out?”

A common issue for those exploring social entrepreneurship is finding the right fit. Too often the earned-income venture can seem like a “thing apart” — separate from the “real work.”  That’s just something we do for money.

Through an appreciative analysis of an organization’s assets and competencies, however, would-be social entrepreneurs can align their income-generating initiatives with their mission, values, and constituents. Doing so brings earned-income initiatives closer to what organizations feel is their “real work,” serving both mission and the organization’s need for financial sustainability.

By Kathleen M. Hosfeld, President

A McKinsey Company study, commissioned by The Marketing Society, recently found most CEOs believe that although marketing has a vital role to play in addressing business challenges, they question marketing’s overall contribution to financial results. The potential of marketing’s possible contribution is not fulfilled.

In some situations, the perception is caused by a lack of measurement. The organization hasn’t measured the “before” and “after” pictures of an otherwise good program, and just can’t tell what part of the mix is working or not. But in many instances this perception points to an underlying weakness in either strategy formulation or execution. “Marketers are the heart of the business but not the head,” said one CEO interviewed. Head and heart must work together.

What this involves is building clear definition of the business model, collaboration between marketing and finance, widespread understanding and support for the business model, and alignment of individuals’ goals and objectives with the key components of the business model relevant to their jobs. Here are three questions that help determine where each organization can start:

Do you have a strategy? A plan is not necessarily a strategy. A strategy would be an actual business model that shows how activity will overcome challenges and lead to financial return. Too often the concept of “marketing” is interpreted only as marketing communications – which can be thought to include advertising, public relations and brand-logo development. A business model includes product or service design, distribution strategy, sales strategy, customer and account management, pricing and more. This careens dangerously into the area of “finance” which is considered a weakness of marketers, according to the McKinsey study. One way to bring head and heart together is to forge a collaborative relationship between marketing and finance that reflects a holistic sense of the organization.

Do people understand and support the strategy? “Understand” would mean they get the rationale of it, how the strategy “works”, what it will accomplish. “Support” means they agree with the strategy and reflect that with their actions. Everyone knows what it’s like when our own head and heart are not in agreement. It’s painful when the head doesn’t support what the heart wants to do and vice versa. While it’s often impossible to get 100% understanding and support of a strategy, each organization needs to do the work to engage the right people. Many employees will say they don’t want to be involved in strategy education or engagement. “Just tell us what you want.” This is often a mask for cynicism about whether the organization is really committed. “Why buy in when the wind is going to blow in a different direction six weeks or six months from now?” they ask. Employees measure management support for a strategy by the extent to which they “stay the course.” For full return on investment (ROI), then, the marketing strategy must manage and renew the engagement and support of the company for a sustained period of time.

Does everyone know what it means for their job? The head and heart are willing, but the flesh is…well..confused. Strategies are often crafted by highly intuitive people who think the implications of the strategy are clear and obvious. Many people however need help to determine what a strategy means for their job or their department. Organizations that fail to do this translation create a disconnect between the strategy and how members of the organization interact with the world. Often, some type of training or staff development is necessary to make sure all employees are living the strategy, including how they demonstrate brand values and promises in their day-to-day activities.

One of my colleagues, Hans Carstensen III, created broad participation in his company?s business model through creation of a companywide budgeting/planning system that tied goals and objectives in a clear way to the desired performance of a part of their business model. Each goal or objective for the $7.0 billion-in-assets insurance company had a “key performance indicator” (KPI) selected by the unit manager and the position-holder; these were monitored throughout the year. Bonus compensation was tied to performance. “The result,? says Carstensen, “was that everyone had a stake in and a sense of how their position was contributing to the business model’s overall success.”

Strategic management tools the “balanced scorecard,” systems thinking, integral theory, learning organizations — reflected in the three points above are all great ways to see the organization the way your customers see it, to tear down the barriers between head and heart to create a more aligned, successful organization.

Another important step in bringing head and heart together is aligning the business model with values and purpose, and our design to make the world a better place. We?ll save that enormous subject for another article.

By Kathleen M. Hosfeld, President

Three questions can help organizations connect their strategies and brands to The Great Story, the important work of our time. I first realized the value of the “great story” more than a decade ago, in listening to my retired father and a colleague reminisce about their days in the aluminum industry. At a dinner together I heard the two former executives wax nostalgic.

“It’s not the same as when we were there, Bob,” his friend Clay said. “All these young guys care about is their careers. You and I, what we cared about was aluminum.”

The reverence with which he said the word aluminum went beyond the value of excellence, beyond the pride of creating quality. Mass production of aluminum changed everything – from airplanes (once made of wood and fabric), to rail cars, to building construction materials, to medical tools, to food storage. Aluminum was the metal that would carry us to the moon.

The power of aluminum to create a better world was the kind of purpose that called for service beyond self-interest. It was clear in the way Clay said the word aluminum that to him it meant a brighter future for his children and grandchildren. That future was worth his dedication and creativity.

Whether we work in a for-profit or a non-profit, for government or private enterprise, the larger story of our work makes it worth the best we have to give.

The Three Questions

In strategy work with clients, I’ve found that defining the organization’s purpose around something compelling to people both inside and outside the organization depends on answering three questions:

• What is the change we want to see in the world because of our work (shared vision)?
• What are the means we will use to create this change (shared means)?
• How do we want to be together as we do this work (shared values)?

Seeing the Change

When we ask the question, “What is the change we want to see in the world because of our work?” we assume that we have a degree (if small) of influence over a vast system. The question implies we’re looking for a point of leverage in the system. Another way to ask the question is “Why make a change at all? What is the need?” Sometimes, we already know the change we want to create in the world – more home ownership, greater fuel efficiency, healthier kids, engaged citizens. We can look around us and see that others care about this same change because they too are working in their own way to address this need. This gives us a sense of who our partners, collaborators or competitors might be. Most of us are unaccustomed to thinking about our work in terms of our impact on the world. Some entrepreneurs respond to this question by realizing they’ve lost track of their original goals for their business.

Creating the Change

The next question, “What are the means we will use to create this change” defines the day-to-day tasks and methods you use to achieve your goal. A technology support division of a local city government might have a goal to become an essential resource to the entire city system. But there might be many roads to get to this shared destination. Is it through superior help-desk solutions? Is it through catalyzing technology upgrades? Defining shared means is an agreement about strategy.  Clarifying “shared means” results in focus, and thus creates greater return on investment of learning and capital. It often requires sifting through what others (competitors or collaborators) are already doing, what your organization does best or most successfully. It also means listening to what customers or other constituents validate as meaningful. This validation can be purchases and customer loyalty in a for-profit venture. In a non-profit it can be expressed through grants and donations that support the work.

Being The Change

How we create the change is very often influenced by asking “How do we want to be together as we do this work?” This speaks to something very different than the values statements senior managers post on bulletin boards for everyone’s compliance.  This question gets at the underlying values that reflect how we want to be treated or how we (the people) agree to treat each other in the workplace even when there’s no external reward. Creating alignment between the goals and organizational culture creates integrity; it says “we walk our talk.”  For many employees, agreements about how we want to be together can be as important as the change we want to see in the world. Positive social networks, being a valued member of a productive team, and the ability to take pride in their work create meaning for many employees that brings out their best contribution. These agreements can create stability at times when the larger strategic vision is shifting.

Answering these three questions benefits an organization in several ways. It:

• Creates efficiency through clear focus and alignment resulting in faster progress and fewer wasted resources;
• Articulates a compelling foundation for brands and other marketing messages;
• Fosters productive social connections among employees who then share the same goals; and
• Establishes a positive purpose for the organization in the context of a larger, dynamic system.

These questions and their answers lead us back to that place of the great story of our work. We’re not just telling a good story about our company and work as many corporate storytellers do. Rather we are seeing the Great Story of our time, finding our place in a story that is bigger than us, bigger than the place we work, and committing ourselves to work that is worthy of our passion and service. This is living a great story.

(This article was originally published in March of 2005.  My father, Bob Hosfeld, an Alcoa executive, contributed significantly to the original version. Its continued publication is dedicated to his memory and his legacy as a “spiritual advisor” to his colleagues.)