Tuesday, March 19, 2019

Small Business Loan Statistics 2019: How Your Industry Affects Your Loan Chances



There are common characteristics for small businesses across various industries when it comes to loan success and failure rates. It is vital for all businesses to secure finance before their campaign is fully launched. The two most common reasons for small business failure are (a) cash flow issues (b) starting off with too little money. This is true for all small businesses across various sectors. A small business is defined by the Small business Association (SBA) as a business with less than 500 employees.

As per the Bureau of Labor Statistics, the failure rate for small businesses is consistent across most industries at roughly 20% in year one. Health and social care tend to have a higher success rate while construction ranks among the lowest. Generally, the differences are not huge, though specific industries within common categories can skew the figures.

However, this does not accurately reflect the reality of getting a loan from an online lender, institution, or bank. Because of various stigmas, certain industries have been denied financing and may find it more difficult to acquire a loan.


The Restaurant Failure Myth



It is commonly believed that attaining a restaurant loan is incredibly difficult to do . This is due to the preconceptions that institutions have that restaurants always fail and are risky, with a high probability of failure in the initial phases. But as can be observed below, both of these points are false. Restaurants have a similar failure rate and a similar loan success rate compared to most other sectors.

As per official data, the failure rates for restaurants are not different from other industries. A commonly cited statistic is that 60% of restaurants close within the first year. But according to the SBA (the authority for small business research in the USA), the figure is closer to 20% (the typical average), and the failure rates for all small businesses are similar:
For employer businesses, survival rates as businesses age followed similar patterns for manufacturing, retail trade, food services & hotels, and construction. The fact that the food services industry shows no greater propensity to fail runs counter to the myth that restaurants are a relatively risky business

The takeaway is that restaurants are not riskier than any other industry and they are treated much the same by banks as other small businesses in terms of applying for a loan. However, some industries do have lower rates of default and are more likely to secure funding for an SBA(7)(a) loan. After all, the banks are going to take the industry failure rate into account when determining a loan, as they always rely on the hard data. Outlined below are some of the loan failure rates per industry.
Latest SBA Loan Failure Rates by Industry Code

As per the official data from the Bureau of Labor Statistics, the rate of failure for small business enterprises is 20% in year one, 30% in year two, 50% in year 5, and 70% in year ten. This is more or less the same across industries, even accounting for economic upsets. But loan success rates are an entirely different story.


Dried and Dehydrated Food Manufacturing (311423)
10.87%
Wine and Distilled Alcoholic Beverage Wholesalers (422820)
11.11%
Industrial Building Construction (236210)
12.11%
Highway and Street Construction (234110)
12.4%
Full service restaurants (722110)
19.53%
All Other Miscellaneous Store Retailers (453998)
21.34%
Internet Publishing and Broadcasting (516110)
25.27%
Limousine Service (485320)
27.31%
International Trade Finance (522293)
29.55%
Public Finance Activities (921130)
58.33%
Shellfish Fishing (114112)
74.9%
This is just a small sample from an extensive list. It does not investigate why specific industries have high or low success ratios, though it is usually associated with the specific rate of default per industry. The sectors with the greatest rates of loan defaults include housing and mortgages, jewelry, siding contractors, associated real estate service, computer and computer peripheral equipment, software merchant wholesalers, travel agencies, and department stores.

In comparison, the lowest default rates by industry include breweries at 3%, support activities for oil and gas operations at 4%, veterinary services ar 4.3%, funeral homes and services at 6.5%, and offices of physical, occupational, and speech therapists at 7.8%.
Latest SBA Statistics – What Else Affects Loan Chances Aside From Industry?

According to the latest SBA release current as of 14 of December 2018, women account for only 28% of all SBA (7)(a) loan approvals, compared to males at 72%. 45% of approved loans are in the region on $350,000 to $2,000,000, 37% towards those that are over $2,000,000, 11% towards those between $150,000 to $300,000, and just 7% towards those that are under $150,000. 48% of total loan approvals go to businesses that are more than 2 years old, 12% toward those that are less than 2 years, 17% to startup companies, and 23% to businesses undergoing a change of ownership.

All these data points demonstrate that bigger and older loan applications are more likely to have success in their application, likely due to improved circumstances such as revenue and credit history. Moreover, they are not limited to just the SBA (7)(a) offering. The SBA 504, another loan offering, shows almost identical percentages. The SBA 504 is designed to facilitate the purchase of fixed assets, typically real estate, building, and machinery, at below market rates.

In terms of ethnicity, whites account for 49% of all loans, with 23% Asian, 17% undetermined, 7% Hispanic, 3% black, and 1% American Indian. Like women, minorities are more likely to start a business without financing from a bank. As can be seen from the SBA office of advocacy report on small business financing options by ethnicity, 8.1% of non-minorities are likely to get a small business bank loan compared to Asian (7.0%), African American (3.2%) and Hispanic (3.6%).

However, it should be borne in mind that this is due to the fact that there are greater numbers of white male businesses that are applying for loans and in a position to succeed. It does not necessarily imply any kind of bias in the loan system itself, which have a rigorous and mathematical process of determining the success of each individual application. The information is also voluntary as per the SBA disclaimer:
“The information being provided above is derived solely from Agency records that are submitted by the Agency’s participant lenders engaged in making SBA loans. This information is collected by the lenders from SBA loan applicants who provide it on a voluntary basis. It is then forwarded by the lenders to SBA”

Small Business Industry Failure Rate

The industry failure rate can vary depending on which data and which algorithm is used. According to an article published in Small Biz Trends, the present 5-year failure rate for companies by sector is:


Mining - 51.3% failure rate
58%
Manufacturing - 48.4 % failure rate
48.4%
Services - 47.6% failure rate
47.6%
Wholesaling and agriculture - 47.4% failure rate
47.4%
Retailing - 41.1% failure rate
41.1%
Finance, Insurance, and Real Estate - 39.6% failure rate
39.6%
Construction - 36.4% failure rate
36.4%
These figures are based on companies founded in 2005 and are based on data obtained from the official Census Bureau’s Business Dynamics Statistics. Dangerous industries will have a harder time securing a small business loan, despite showing strong fundamentals. This is easily observable with the approval rate of risky industries such as public finance activities.
Who Supplies All the Small Business Loans?

The most common provider of small business loans is still banks, with the guarantee provided by the SBA for most loans. As per Finder.com, small businesses borrow over $600 Billion each year, a figure bigger than the entire GDP of Sweden. Large banks are responsible for 48% of total small business loans, with small banks responsible for 47% and online lenders responsible for 24% (businesses often apply to multiple lenders in a calendar year).

However, these figures do not accurately reflect the fact that online alternative lenders are increasing and gaining ground on a yearly basis in comparison to traditional lending models. It is also worth taking into account that many times banks do not approve the full amount in comparison to alternative lenders.

Moreover, the total amount lent could consist of a greater number of larger loans as opposed to alternative lenders who provide financial access of smaller figures to startups that really need it. The bank loans also come with a longer approval time and increased documentation, all variables that need to be taken into account when considering a loan application. Some alternative options are provided below.
Alternative Options

Just because you are in an industry with a low application success score does not mean that there are no options available. There are a wide variety of alternative lenders available that you can make use if.FundBox, OnDeck, and Kabbage are great online providers of term loans and business lines of credit for start-up businesses.

They can be a great alternative to the typical SBA (7)(a) loans. Even with less than stellar credit, the application can be filled in within an hour and the money can be deposited within one business day. For small business loans, sites such as Lending Club provide a peer-to-peer lending platform where borrowers and lenders can be brought together using the terms and conditions on the platforms. Given the small success rate of SBA loan applications, alternative lending options can be ideal.

Of course, it could still be possible to get a loan with a bank. If you do happen to have an excellent credit rating, a good industry, significant collateral, and time to go through the application process, then it may well be a good idea to apply for a typical startup loan. These loans do offer more generous interest rates. But with online lenders such as OnDeck or Kabbage, the loan can be inside your account within 24 hours with minimal fuss. It can also be a good way to repair a bad credit rating. There are also business loans for bad credit which can be ideal for certain enterprises.

It is important to remember that there is a large cross-section of data in terms of loan success rates. The success of any given loan will depend on your industry, credit history, revenue, collateral, time in business, and many more variables. So even if you are in an industry with a low success ratio (such as Shellfish fishing, with a 22% success rate), you can still optimize your chances. The decision has to be made whether you want to proceed with a lengthy loan process or to try and get a faster loan with an alternative lender.

There are also many types of loans to choose from. An unsecured business loan without collateral can be obtained from multiple lenders, but the rates are typically high. Business lines of credit are flexible kinds of loan where you only take out what you need and pay interest on that amount. There are also loan variants such as invoice factoring. Technically, invoice factoring is not a loan, but where a business sells its invoices to a factoring company at a discount in exchange for cash.
So How Does My industry Affect Loan Chances?

The industry you are in will affect your loan chances. Standard retail outlets such as restaurants and shops will have around a 20% chance of attaining an SBA(7)(a) loan. This can be contrasted to breweries, gas and oil support services, and commercial equipment leasing, which have a large approval rating. This is because they are niche industries with a very low default rate.

However, the 20% statistic only applies when going for a typical bank loan or an SBA (7) (a) loan. When using an alternative online lender, the loan process is completely streamlined. OnDeck, for example, requires a credit score above 500, a year in business, and $100,000 in gross annual revenue.

Once these criteria are satisfied a loan is very likely. However, there are still a select number of industries that OnDeck will not serve. These are Adult Entertainment, Drug Dispensaries, Firearms Vendors, Government & Non-Profits, Public Administration, Horoscope and Fortune Telling, Lotteries, Casinos, Money Services Business (MSB), Religious, Civic Organizations, Rooming & Boarding Houses. Many other online loan operators will have similar restrictions, simply because these industries are more likely to default on their small business loan obligations than their more stable counterparts.

One item that is common across all industries is that small business enterprises who do not get access to finance via loans have a higher failure rate. As per a research paper on small business lending by the Harvard Business School;

As the online marketplace evolves, those who succeed will be the ones who have access to low-cost capital and those who can best access and serve the small business customer, creating products that fit their needs and ensuring that small businesses find their way to the loans that work best for them

Friday, March 15, 2019

State of Women-Owned Small Businesses – Infographic

Source: http://tinyurl.com/y3dcevv9

The number of women business owners increased by 18% in 2017. Today, 26% of business owners are women, and they tend to be younger than male business owners with 51% of women business owners under the age of 50 compared to 44% of male business owners. This data comes from a survey conducted by Guidant Financial of 2,600 small business owners and hopeful business owners. Among the respondents, women accounted for 24% of aspiring business owners.

The study also revealed that women small business owners tend to have more education than male business owners with 74% of women holding an associate’s degree at a minimum compared to 64% of men. The most popular states for women to start businesses according to this survey are California, Florida, Texas, Georgia, and New York in that order.

When it comes to what motivates women and men to start their own businesses, pursuing a passion is the top motivator for 51% of women, but the top motivator for men is to be their own boss (49%). Women ranked being their own boss second (49%) followed by an opportunity presented itself (34%), they were laid off or outsourced (12%), and they were not ready to retire (9%).

Overall, 40% of women who responded to the Guidant Financial survey indicated that they were happy in their careers by rating their happiness level a 10 out of 10. Additional highlights from the study include:

-The top five industries that women start businesses in are health/beauty/fitness, general retail, business services, food/restaurant, and cleaning and maintenance.
-Most women business owners own businesses with 2-5 employees (42%) followed by just one employee – themselves (39%).
-More than half of female entrepreneurs (58%) who purchased businesses did so for less than $50,000.
-Among women who financed their businesses, nearly 60% did so with cash. Less than 15% were able to get a line of credit or unsecured loan.
-The top challenge for women business owners is a lack of capital or cash flow (73%).
-The most commonly outsourced task among women business owners is tax preparation.
-60% of women business owners say their businesses are profitable.
-If they had additional capital, most female business owners (56%) would invest in marketing and advertisingAmong women who want to be business owners in the future, the biggest obstacle they report facing is that they cannot get funding (74%). 
-More than two out of three aspiring female entrepreneurs (69%) use the internet to learn about financing options, and the same percentage of women don’t have the cash for a downpayment to start their businesses. 
-Most of them (59%) are pursuing an SBA loan to fund their businesses, but according to Guidant Financial, fewer female entrepreneurs secure SBA business loans than male entrepreneurs.

You can see all of this data and more in the infographic from Guidant Financial below. What do you think? Do any of these statistics surprise you? Share your thoughts in the comments below.

Infographics here: http://tinyurl.com/y3dcevv9

Research: When People See More Women at the Top, They’re Less Concerned About Gender Inequality Elsewhere


Source: https://bit.ly/2TWxwLP

Written by:
Oriane Georgeac
Aneeta Rattan

Over the last two decades, organizations have seen substantial progress in increasing women’s representation in top leadership. Consider this: in 1995, there were no women Fortune 500 CEOs and only a few token women on Fortune 500 boards; in 2017, there were 31 women Fortune 500 CEOs corporate boardrooms were 22% women. While the numbers are still far from parity, the general view is that this progress for women in top leadership will naturally spread to improve women’s outcomes in other domains, such as pay equality.

Anecdotal evidence, however, suggests otherwise. Despite women’s progress in top leadership, the gender pay gap in the United States has decreased on average by less than 0.4 cents annually since 1960. Iceland, which holds the world record for women’s representation on boards (44% in 2018), continues to have a 14% gender pay gap — equivalent to that of most Western countries. Gender progress in one domain thus frequently coexists with gender inequality in others.

This led us to wonder: how does progress toward gender equality in one domain, like top leadership, shape people’s concern with persisting inequality in other domains, like pay?

We investigated this question in five studies (in press at the Journal of Experimental Psychology: General), which involved a total of 2,726 U.S. American participants. Across studies, we measured or experimentally manipulated people’s perceptions of gender diversity in top leadership and found a strikingly consistent pattern — when people perceive greater levels of women’s representation in top leadership, they overgeneralize the extent to which women have access to equal opportunities, which then decreases their concern with gender inequality in pay and other domains.

In our first study, we asked 331 employed women and men to read an article about the purported “three most notable business lessons” from the previous year. The article included three columns: one about brainstorming, another on corporate culture, and the last one on gender diversity at the top of U.S. organizations. Only the last column randomly varied across participants — either saying that “women’s representation in top leadership is strong” or “women’s representation in top leadership is low.” We then presented participants with six factual statistics about the gender pay gap, and asked them to indicate their level of disturbance with each of them. To make sure that any effect would be specific to gender-related inequality, we also measured people’s concern with gender-unrelated wealth inequality in the U.S.

Participants who read that gender diversity was strong in top leadership reported less concern with the gender pay gap than participants who read that gender diversity was low. Participants in both groups, however, exhibited equal levels of concern with wealth inequality, which suggests that the effect is specific to gender inequality. Interestingly, this effect was the same across men’s and women’s responses.

Would we see this effect without giving people initial information about female representation in leadership? To test this, we asked 350 employed participants (Study 2a) and a quasi-representative panel of 1,098 Americans (Study 2b) to give us their best estimate, from 0% to 100%, of the current average level of female representation at the top of U.S. organizations.We also measured their concern with the gender pay gap, and the extent to which they believed that women no longer face barriers and have access to equal opportunities.

We found the same results across both studies: The higher participants’ estimate of women’s representation in top leadership, the more they believed that women have access to equal opportunities in society, and the less they felt concerned about enduring gender inequality in pay.

Another study of 454 working participants gave us more insight into the deeper processes at play. We again found that when people learn that gender diversity in top leadership is strong, they then believe more that women have access to equal opportunities in society. We saw that this in turn predicted them attributing the gender pay gap significantly more to women’s personal career choices, which also contributes to explaining why they felt less concern about the gender pay gap.

In our final study, we wanted to test whether this belief that women were well represented in top leadership could also make people care less about gender inequality in other areas, such as in the division of chores at home, lower access to venture capital funding for women entrepreneurs, less pay for women’s sports teams, stereotypical depictions of women on TV and in movies, and gendered pricing (e.g., things like women’s razors and dry cleaning are more expensive than men’s).

To test this, we again randomly assigned 326 working participants to read an article describing gender diversity in top leadership as high or low. We found that participants who read that gender diversity in top leadership is high indeed showed less concern with gender inequality across these different domains than participants who read gender diversity was low.

To sum this all up, we found that seeing progress for women’s representation in top leadership (either spontaneously or after reading an article) leads both women and men to think that women have greater access to equal opportunities. This overgeneralization of progress, in turn, makes people less worried about the persisting inequalities that women face daily, across a variety of domains at work and beyond.

These findings are worrisome because people’s concern with inequality ultimately predicts their willingness to address it. While organizations, countries, and advocates rightfully regard women’s representation in top leadership as an important indicator of progress toward equality, our research suggests this indicator is by no means sufficient to ensure women’s continued advancement in society, as unexpected new barriers to gender progress may ironically arise as women become more visible at the top of organizations. Achievements for diverse representation in top leadership should, of course, be celebrated. For researchers and leaders alike, however, the challenge will be to find ways to publicize progress toward greater gender diversity at the top without jeopardizing progress for gender equality in other aspects of life.

Women scarce at top of U.S. business – and in the jobs that lead there

Source: https://pewrsr.ch/2HARuVN

BY DREW DESILVER

Despite the advances women have made in the workplace, they still account for a small share of top leadership jobs. That’s true in the fields of politics and government, academia,the nonprofit sector – and particularly business.




Women held only about 10% of the top executive positions (defined as chief executive officers, chief financial officers and the next three highest paid executives) at U.S. companies in 2016-17, according to a Pew Research Center analysis of federal securities filings by all companies in the benchmark Standard & Poor’s Composite 1500 stock index. And at the very top of the corporate ladder, just 5.1% of chief executives of S&P 1500 companies were women.

Nor do many women hold executive positions just below the CEO in the corporate hierarchy in terms of pay and position. Only 651 (11.5%) of the nearly 5,700 executives in this category, which includes such positions as chief operating officer (COO) and chief financial officer (CFO), were women. Although this group in general constitutes a significant pool of potential future CEO candidates, the women officers we identified tended to be in positions such as finance or legal that, previous research suggests, are less likely to lead to the CEO’s chair than other, more operations-focused roles.

Within the 11 broad economic sectors into which the 1500 companies are divided, in no case did women make up even a fifth of CEOs or non-CEO top executives. Nor do those levels appear likely to rise much anytime soon. A 2017 survey of corporate human-resource heads at large U.S. companies found that women made up only 10% of the short-term CEO candidate pool (i.e., people who’d be considered for promotion to CEO within the next three years). Looking out further, three to five years in the future, raised the share of women in the CEO candidate pool only to 15%.

This research builds on and extends previous work by other researchers that has found low levels of women leaders in major U.S. companies. To arrive at our count of women in top executive positions, we looked at compensation reports filed by all S&P 1500 companies with the U.S. Securities and Exchange Commission in calendar year 2017, most of which covered company fiscal years that ended in 2016 or early 2017. (We chose this time frame because fiscal years vary so much from company to company.)
About this analysis

In general, the SEC requires companies to report detailed pay information for their CEO, CFO and the next three highest paid executives. Collectively referred to as “named executive officers,” this group often are considered by leadership researchers as equivalent to a company’s top management team; they not only include the CEO but also are a reservoir of potential CEOs, either for their own company or another one. In our analysis, we looked at CEOs and non-CEO top executives separately. (We excluded any executives who had left their company by the time the compensation report was filed.)



The share of non-CEO top executives who were women differed little by company size (as represented by the S&P 1500’s three size-based component indices), but did vary considerably by broad sector and specific industry. The sector with the highest share of women in such positions was utilities, with 17.3%; utilities also had the biggest share of female CEOs, with 10 out of 54 or 18.5%. 

In the consumer discretionary sector, a diverse category that includes makers and sellers of everything from cars to handbags and service providers ranging from hotels and restaurants to wedding planners and broadcasters, 16.1% of non-CEO top executives were women. By comparison, only three of the 50 non-CEO top executives identified by the 13 telecommunications companies in the index, or 6%, were women. Telecom also was the only sector with no women CEOs.

Taking the analysis down to the industry level revealed that women CEOs and non-CEO top executives both were heavily concentrated in a handful of industries. More than half (43) of the 77 female CEOs worked in just 10 industries, with eight of them heading specialty retailers. Nearly half (31) of the 67 industries represented in the index had no female CEOs at all. Similarly, about half (53.3%) of the female non-CEO top executives worked in just 15 industries. Specialty retail led the way here as well, with 49 non-CEO top executives who were women. By percentage share, the leading industry was gas utilities: 12 of the 40 non-CEO top executives reported by those companies, or 30%, were women.




What specific positions did those women hold? Our analysis found them to be highly concentrated in just a few types of corporate jobs: 168 (25.8%) were the CFOs of their companies, while another 19 held other finance positions, such as controller or chief accounting officer. (In fact, women made up 11.2% of all CFOs, versus 5.1% of CEOs.) Nearly a quarter (23.7%) of the female second-tier executives were corporate general counsels or chief legal officers, and nearly 10% were chief human resources officers or the equivalent.


In addition, 47 women non-CEO top executives (7.2% of the total) were designated president, COO or a similar title, and 96 (14.7%) were the heads of major subsidiaries or operating divisions. The relative scarcity of women in high-level operational roles may be significant, because management researchers have found that, generally speaking, companies and their boards (who formally appoint the CEO) prefer to have people with operational experience in the top spot.

The executive recruiting firm Crist Kolder, for instance, found that more than three-quarters of CEOs at large U.S. companies had been either COOs, divisional presidents or operating executives immediately before getting the top job; 6.7% had been CEOs at other companies, while 4.1% were founders. Only about 11% had gone directly from CFO or some other top executive job to the CEO chair.

A recent study concluded not only that being CFO made a person less likely to be picked as CEO, but that the likelihood decreased as company sales grew, “suggest[ing] that larger, more complex firms are unlikely to choose their CFO as the next CEO.” Being a COO, however, increased a person’s chances of becoming the next CEO – perhaps not a surprising finding, given that companies frequently appoint their CEO’s “heir apparent” as COO (or an equivalent title, such as president) with the idea of “grooming” that person before he or she formally takes the top job. (The “grooming” strategy doesn’t always work out: A 2001 study, for example, found that for every two COOs who end up in the CEO’s chair, one exits the firm, voluntarily or otherwise, without becoming CEO.)


Holding Decision-Makers Accountable: How to Reach the Next Level for Gender Balance in Management Positions




Written by Sabine Mueller

Deutsche Post DHL Group has won the 2019 Catalyst award for our “Women in Management” initiative. I am very proud that we have substantially woven a culture of diversity into our company’s fabric and were able to grasp gender disparity – especially in higher ranks – by its roots.

This is why I am even happier these efforts and our deeply dedicated work for a more diversified organization now are being honored with a Catalyst award (more info here.) The DPDHL Group is actually the first German company to receive the award.

Time to celebrate the successes – and continue the good work with vigor


As of today, more than one in five management positions at DPDHL Group are occupied by women. Although that might not sound like a lot to someone who hasn’t been proactively tackling gender imbalance for over a decade, sadly, this still has to be called a great achievement.


Yes, I know how ridiculous that sounds and believe me – I’d much rather be celebrating five in ten just as much as you do. It is a start for an industry like ours though, one that is traditionally male dominated and is not seen as attractive as other industries for women. But these numbers show just how much more work there is still to be done. My main message here is: The male/female ratio for leadership positions is still not acceptable. Let’s keep the sleeves rolled up and work even harder.


Acknowledging this is one step in the right direction. But what exactly can we do to catapult gender diversity to the next level?
We need to hold our managers accountable

We as leaders need to own and drive the topic.


The notion that has to change fundamentally is how passive some leaders still are in regard to establishing gender balance. I am convinced one of the main reasons for this is the lack of accountability: Some managers’ superiors do not hold their direct reports accountable for gender disparity in their respective departments. Consequently, the manager’s motivation to take ownership for the issue naturally is often on the down low.

This also becomes apparent when you look at the fact that all-male leadership teams still are by no means a scarcity in today’s business world. The same also still holds true for our Group and yet, the voices questioning these circumstances are not loud and not numerous enough.


In my opinion, the crux here really lies in the accountability. It is crucial for change. So how can we hold decision-makers accountable?
Get it on people’s agenda. Leave it there.


Before you ask: I am actually not a fan of quotas, because I think there are other ways to establish gender balance that I am convinced will have a deeper impact on the collective business psychology.

Obviously, there is no one size fits all solution here, but decentralizing ownership for the topic is key. One step in the right direction would be to make it a topic in any review meetings you have with your direct reports.

If you want to think more along the lines of “What gets measured gets done”, I would like to introduce to you a more formalized option to make sure diversity is staying on people’s agendas: a diversity score. Let me briefly explain what I mean by that.

1) You start by defining relevant diversity objectives for your respective organization, such as gender, age, nationality, etc. Do not try to fit them all into the score directly. Focus and prioritize.
2) Then, calculate a diversity score for every organizational unit based on your weighted criteria.
3) Focus on an incremental continuous improvement of the individual scores rather than for a one size fits all target score.
4) Use the competitive landscape of the business world as an enabler – handle the diversity score with the same motivation as you do your financial targets and transfer the ambition on to your direct reports.
5) Remember to always assess and incentivize progress.

I do understand that running a business or a certain function will always force us, the people we manage and our superiors, to handle many priorities, such as cost and EBIT targets , challenging customer expectations or other urgent topics. This complexity can easily divert our attention away from promoting diversity.

Unfortunately, my experience shows that without us putting our mind to the task and continuously pushing measures gender balance in leadership teams will not be achieved.


Because on the long run, your efforts will pay off: As I have stated many times before, my experience at DHL Consulting shows that more diverse teams lead to more innovations and over all better results.
P&L and operations as doors to executive functions


Another point we need to remember is that P&L and operations functions are often predestined for promotions to leadership positions.

So if we want to build a sustainable gender balanced work force, we need to go beyond promoting more women into functions such as HR, communication, legal or marketing. We need to keep in mind that careers in operations, country- and regional management and P&L lead to positions in the executive level much more often.


Still today, line positions are predominantly held by males. Research clearly shows that women tend to hold roles in support/staff functions such as legal and HR and are underrepresented in positions with P&L responsibility. By the time women reach the SVP level, they hold only 21% of the line positions.


The reasons for this are obviously manifold, but two very probable reasons stick out for me:
Many organizations are apparently unconsciously risk averse to promote women into CEO and P&L roles.
In turn, women often seem more risk averse than men, hindering themselves to take the challenge of a P&L job. (Womencount 2017, The Pipeline)

I am convinced that if we master these two central challenges, we will be able to move the needle and make a giant step towards gender parity in management positions.

My very personal appeal to all my female readers therefore is simple: If you have leadership ambitions in today’s business world, you need to leave your comfort zones, and you need to learn to take risks and keep pushing. Becoming a CEO requires dedication, courage and confidence in one’s own capabilities, and one of my main ambitions is to inspire women to step out of their comfort zones to accelerate growth.

On top of that, companies need to develop dedicated programs to build a pipeline and consequently develop women in line functions.
Let’s keep it moving

As I have stated many times before, promoting Women in Management and different cultural and educational backgrounds has proven to be crucial for our company’s success.

It takes more than dedicated women to change the system. We as top management from Deutsche Post DHL need to set the tone and lead by example. Again, I am very happy and proud that Catalyst has honored our efforts and I congratulate my team from the bottom of my heart. But we have to keep moving.


I very much look forward to engaging with you on the topic of Women in Leadership. Please share your professional experiences and your perspective on women in the logistics sector in the comments, or on my Twitter or LinkedIn channel.

New Americans in Houston


Women in the Workplace 2018


The 2017 State of Women-Owned Businesses Report


Thursday, March 7, 2019

The Dual-Purpose Playbook


Source: https://hbr.org/2019/03/the-dual-purpose-playbook

By:Julie Battilana Anne-Claire Pache Metin Sengul Marissa Kimsey

Corporations are being pushed to change—to dial down their single-minded pursuit of financial gain and pay closer attention to their impact on employees, customers, communities, and the environment. Corporate social responsibility from the sidelines is no longer enough, and the pressure comes from various directions: rising and untenable levels of inequality, increasing evidence that the effects of climate change will be devastating, investors’ realization that short-term profitability and long-term sustainability are sometimes in conflict. For reasons like these, a growing number of business leaders now understand that they must embrace both financial and social goals.

However, changing an organization’s DNA is extraordinarily difficult. How can a company that has always focused on profit balance the two aims? It takes upending the existing business model. Not surprisingly, researchers have consistently found that companies are quick to abandon social goals in the quest for profitability.

Grameen Veolia Water’s social and financial goals inevitably came into conflict.


Yet some enterprises successfully pursue both. The U.S. outdoor-clothing company Patagonia, for example, which initially prioritized financial goals, has come to pursue social good more seriously over time. Others began with social goals but must earn revenue to survive. Grameen Bank, the Nobel Prize–winning microlender in Bangladesh, is an iconic example. We’ve spent a decade studying how socially driven businesses succeed, and what we’ve learned from in-depth qualitative studies and quantitative analyses may prove useful to traditional companies that want to adopt a dual purpose.

Our research reveals that successful dual-purpose companies have this in common: They take an approach we call hybrid organizing, which involves four levers: setting and monitoring social goals alongside financial ones; structuring the organization to support both socially and financially oriented activities; hiring and socializing employees to embrace both; and practicing dual-minded leadership. Taken together, these levers can help companies cultivate and maintain a hybrid culture while giving leaders the tools to productively manage conflicts between social and financial goals when they emerge, making the endeavor more likely to succeed.

Setting Goals, Monitoring Progress

Dual-purpose companies need to set goals along both financial and social dimensions and monitor performance on an ongoing basis.

Setting goals.

Well-constructed goals are an essential management tool. They communicate what matters and can highlight what’s working and what’s not. These goals should go beyond mere aspirations to clarify a company’s dual purpose for employees, customers, suppliers, investors, and regulators. Companies may need to experiment their way to a goal-setting model that works for them—something Grameen Veolia Water has managed by continually recalibrating its activities around explicit aims.

The company, which provides safe water in Bangladesh, started in 2008 as a joint venture between Grameen Bank and the water services provider Veolia. Veolia, which traditionally works under government contracts, recognized that no local authorities were responsible for providing drinking water to rural areas at that time. The partnership aimed to fill this gap. Its board set two goals for the new business at the outset: to provide safe, affordable drinking water to the inhabitants of the rural villages of Goalmari and Padua over the long term, and to sustain operations from sales without relying on grants.

These two goals came into conflict. When managers realized how difficult it would be to break even if they sold water only to poor rural households at a very low price, they designed a new revenue-generating activity: selling water in jars to schools and businesses in nearby urban areas. At this point it might have been tempting to focus attention and resources on the profitable new market segment at the expense of the original one. But leadership did not drift. The venture’s clearly stated social goal reminded board members and managers that urban sales were meant to subsidize village sales. Ultimately the former amounted to half the company’s revenues, helping Grameen Veolia Water pursue its social goal.

No single playbook exists for setting social goals. But our studies point to two rules of thumb. First, do the research. Often leaders try to set goals without developing a deep understanding of the specific social needs they aim to address—or of how they may have contributed in the past to the buildup of problems. Just as they conduct market research to identify opportunities for profit, they should study those social needs. Their research should involve the intended beneficiaries along with other stakeholders and experts.

Prior to launching operations, Grameen Veolia Water conducted major research to understand water issues in Bangladesh, interviewing public officials and health and water experts along with community organizations. Managers discovered that some rural populations suffered not only from drinking surface water contaminated with bacteria (the researchers’ initial assumption) but also from drinking water from wells built in the 1980s. Some well water, although clear and tasteless, was naturally contaminated by arsenic and was a major source of cancers in adults and cognitive impairment in children. This information led the business to focus its activity in Goalmari and Padua, which suffered from both sources of contamination. The company thus defined its goal as providing permanent access to clean water for everyone in those villages.

Second, set goals that are explicit and enduring (though they may have to be updated in light of a changing environment). Impact would be limited if the village residents consumed clean water for just a few years; to achieve a significant positive change in their health, they would need access to clean water over decades.

Monitoring progress.
Just as important as setting goals is identifying and adapting key performance indicators (KPIs) in order to measure the achievement of specific targets, be they financial or social. While we know how to measure sales, revenue growth, and return on assets, no widely accepted metrics currently exist for many social goals (although more progress has been made on measuring environmental impact). Nonetheless, it is possible to set both financial and social KPIs successfully. Our research has found that companies succeed by dedicating substantial time and effort to developing a manageable number of trackable metrics during the goal-setting process and revisiting them regularly to assess their continuing relevance and adequacy.

At Grameen Veolia Water, managers consulted with members of the rural communities they sought to serve and with academic experts before formalizing four KPIs: the company’s self-financing ratio (its ability to fund planned investments from its own resources), the number of villagers with access to its services, the rate of rural penetration, and the rate of rural regular consumption (which captures both financial and social performance). The four numbers are updated monthly to monitor operations, and the board discusses them quarterly to guide strategic decision making.

A learning mindset is essential for developing and using KPIs. A willingness to experiment and change on the basis of experience, whether their own or others’, helps businesses better understand social problems and how to address them. Dimagi’s approach to setting social performance metrics exemplifies this mindset. Founded in 2002 and led by Jonathan Jackson, one of its cofounders, Dimagi provides software that NGOs and governments can use to develop mobile apps for frontline health-care workers in developing countries. At first Dimagi’s primary social metric was the number of active users, which was meant to indicate how many people the technology positively affected. Jackson hoped to improve this metric, because it failed to distinguish between those who actually used the data to improve service delivery to patients and those who collected but did nothing with it.

The company formed a dedicated impact team to refine the social KPI. After exploration, the team created a metric—“worker activity months”—to measure the number of health care providers who were actually applying Dimagi’s technology, and it implemented internal data systems to track the metric across all projects. But Jackson soon realized that this, too, was flawed, because the outcome was beyond Dimagi’s control: How workers used the software depended more on the actions of Dimagi’s clients—NGOs and governments—than on its own.

After reaching out to other social enterprises for advice, Jackson reverted to the number of active users as the company’s primary social barometer, yet combined it with a new entity—an impact review team—that focused on qualitative quarterly analyses and discussions about the impact of all projects. These reviews ensure that a team doesn’t focus unduly on the quantifiable aspects of a project (revenue, costs, completion dates) but also explores the effectiveness of its service delivery and how that could be improved to better support frontline health-care workers. The team discusses indirect forms of impact as well, such as helping organizations assess their readiness for digitization.

Every meal Revolution Foods sells to a school creates both kinds of value.

Other successful businesses also complement KPIs with in-depth qualitative assessments of their social performance. For example, the Brazilian impact investing firm Vox Capital hired Jéssica Silva Rios, an executive dedicated to understanding and measuring its impact, and recently made her a full partner. Some companies also incorporate external social indicators developed by independent NGOs such as the Global Reporting Initiative, the Sustainability Accounting Standards Board, and B Lab. For example, Vox Capital monitors whether its rating from the Global Impact Investing Rating System is above average in comparison with other funds in developing markets and adjusts the fees it charges investors accordingly.

Structuring the Organization

It’s virtually impossible to succeed on financial and social fronts over the long run if the company isn’t designed to support both. Achieving an effective design requires that you think about which organizational activities create economic value and which create social value, how those activities relate to one another, and how you’ll try to balance them.

Aligning activities and structure.

Some activities create social and economic value at the same time. Others create predominantly one kind of value. For activities that create both kinds, an integrated organizational structure usually makes sense. Otherwise the activities are often best managed separately.

Revolution Foods, founded in 2006 by Kristin Richmond and Kirsten Tobey, provides nutritious lunches to low-income students in the United States. Richmond and Tobey created the company to serve a social purpose, having witnessed how poor food options hold kids back in underfunded schools. Every time they sell a healthful meal to a school, two things happen: They enhance a child’s health, and they make money. Their core activity thus creates both kinds of value. As a result, they opted for an integrated structure, with a single manager in charge of operational efficiency, business growth, and the promotion of child well-being. Account managers often engage students in nutrition education (either directly or through community organizations), introducing them to new foods and collecting their feedback on taste. The exposure to healthful foods enhances the long-term wellness of students and supports sales at the same time.

In contrast, the French company ENVIE learned over time that it needed to decouple the two kinds of activities. Launched in 1984, it had the goal of reintegrating long-term unemployed people into the job market by hiring them on two-year contracts to collect and repair used appliances for sale in secondhand shops. The company also provides support and training in how to repair appliances, how to look for a job, how to write a CV, and how to interview. The resale of appliances is what creates economic value. The training to enhance individuals’ ability to find jobs outside ENVIE creates social value, but it doesn’t make the company more profitable—in fact, it increases costs.

In the early years, staff members were asked to do two jobs: give beneficiaries technical guidance on how to repair or dismantle appliances (economic value) and provide them with social support (social value). However, it was difficult to find supervisors with both social and technical expertise. Even when they had both, the supervisors struggled to balance the two dimensions of their jobs. ENVIE’s founders accordingly decided to set up separate organizational units, one for social support and one for repair, to be overseen by social workers and technical experts respectively. This increased the company’s effectiveness in generating both kinds of value.

Creating spaces of negotiation.

The rub is that tensions inevitably arise—particularly in differentiated structures. Left unattended, they can bring an organization to a halt. The Bolivian microlender Banco Solidario provides a cautionary example. In the 1990s constant resentment and fighting between bankers (concerned with fees and efficiency) and social workers (concerned with the affordability of loans and the livelihoods of microentrepreneurs) essentially froze the company. Loan officers quit left and right, the number of active borrowers plummeted, and the profit margin dropped. We’ve found that successful dual-purpose companies avoid such paralysis by supplementing traditional organizational structures with mechanisms for surfacing and working through tensions. These mechanisms don’t make the tensions disappear—rather, they bring them into the open by letting employees actively discuss trade-offs between creating economic value and creating social value. Such deliberation provides a powerful safety valve and can speed up effective resolution.

Consider Vivractif, another French work-integration company. Founded in 1993, it hires and trains the long-term unemployed at recycling facilities. Those responsible for achieving one kind of goal or the other at the company often did not see eye to eye. While production supervisors managed workers to meet recycling targets, social workers were eager to take them away from the floor for mentorship and job-search training. The company set up quarterly meetings between the two groups so that they could discuss each beneficiary’s progress and bring up coordination issues. Joint work planning allowed both to share important deadlines (such as for commercial deliveries or social trainings) and to find joint solutions to scheduling conflicts. This improved productivity and furthered the company’s social goals.

Spaces of negotiation can be successful in large companies as well. In one multinational cooperative bank headquartered in Europe, decision makers representing each of the local branches collectively make strategic decisions only after iterative debate, during which different groups of employees are responsible for championing either the social or the financial objectives of the organization. When individuals speak up about issues, their assigned roles prevent tensions from becoming personal.
Hiring and Socializing Employees

Embedding a dual-purpose focus in an organization’s DNA requires a workforce with shared values, behaviors, and processes. Hiring and socialization are crucial to getting that right.

Employees in a company that pursues dual goals tend to be successful when they understand and connect with both the business and the social mission. We’ve seen companies mobilize such people by recruiting three types of profiles: hybrid, specialized, and “blank slate.”

Hybrid individuals arrive equipped with training or experience in both business and social-value fields, such as environmental science, medicine, social work, and so forth. Such people are able to understand issues in both camps and can connect with employees and other stakeholders of either orientation.

Jean-François Connan is a good example. He was recruited in the late 1980s by Adecco, one of the largest temp work groups in the world, because he had training in industrial maintenance and human resources and experience as a teacher and a mentor for at-risk youth. The company hired him to help address a long-standing problem: A large number of its temp workers lacked strong qualifications. Connan played a leading role in building a dual-purpose subsidiary for Adecco that helps the long-term unemployed reenter the job market by hiring them for temp jobs. His background lets him interact seamlessly with Adecco leaders and corporate clients as well as with local partners (such as nonprofits dedicated to youth mentorship) and those whom they seek to serve. Now he is the company’s head of responsibility and social innovation.

But hybrid employees aren’t always available and may not always be the best fit. Dual-purpose corporations often hire specialized talent, which allows them to tap into deep expertise and networks in each area. The main weakness of this approach is that it is more likely to result in conflict between groups, which may not understand each other’s norms, vocabularies, and constraints—especially if the organization separates economic activities from social ones. As a result, tensions and turnover in these companies tend to be higher than in those with an integrated structure, producing a negative effect on the bottom line.

To mitigate this at Dimagi, Jackson explains the primacy of the organization’s social purpose on his very first recruitment call with a technical expert (such as a software developer). After hiring, he creates opportunities for the expert to learn about the social business through formal talks, informal office interactions, and even face-to-face fieldwork in the underserved communities with which Dimagi works. Vox Capital, too, has hired managers with technical capabilities (such as fund management) and no experience in a social-mission-driven environment. Yet it systematically screens applicants for their ability to embrace and thus adapt to the company’s hybrid culture.

When companies recruit blank slate individuals, who have experience in neither business nor the social sector, they put them in entry-level jobs and help them acquire dual values and skills. The Bolivian microcredit lender Los Andes S.A. Caja de Ahorro y Préstamo, founded in 1995, took this approach, hiring university graduates with hardly any professional experience to become loan officers. The sense was that they would embrace a hybrid organizational culture more readily than experienced employees might. Of course, this approach has limitations. Taking inexperienced staffers into an organization may lower productivity. It also requires a considerable investment in training.

Although recruitment strategies obviously must be adapted to specific HR needs, we have observed that hybrid employees tend to be particularly well-suited for managerial and coordination positions; specialists can contribute useful expertise as middle managers in differentiated structures; and blank slates do best in entry-level jobs, where training won’t be too challenging.

Socialization.

Once people are on board, socializing them can be daunting. Every employee needs to understand, value, and become capable of contributing to both financial and social goals in some form.

Formal approaches to socialization may include companywide events such as annual general assemblies and retreats where dual goals and values are explained, discussed, assessed, and put into perspective. Dedicated trainings can remind employees—particularly those who specialize in just one sector—of the interconnectedness of revenue-generating and social-value-creating activities. Job-shadowing programs and other forms of experiential training can also purposefully bring different groups together. At Vivractif social workers spend at least one day a year alongside recycling supervisors, and vice versa, so that each can learn and relearn about the company from the other perspective.

Another example comes from Oftalmología salauno, a Mexican company cofounded in 2011 by Javier Okhuysen and Carlos Orellana to provide high-quality, low-cost eye care to people who can’t otherwise afford it. Although the pair saw economic goals and social goals as connected, they observed that some doctors focused only on patient care, and some managers considered only costs. So they formulated a set of core tenets and shared them at a daylong training for all employees, which clarified the interrelatedness of the company’s financial and social aspects and gave employees a shared language for discussing tensions. Okhuysen and Orellana later instituted such sessions for new hires and continue to reinforce the training content in day-to-day interactions.

Spaces of negotiation can be valuable informal socialization opportunities, too. At Vox Capital a weekly time slot allows anyone to pose a question if he or she feels that the company’s practices don’t align with the organizational mission and values or is witnessing financial-social trade-offs. Employees haven’t shied away from tough topics. Some have asked whether its investment portfolio sufficiently emphasizes the social missions of the businesses, while others have questioned whether the company’s approach to raising capital is ethical.

Such conversations pushed cofounder Daniel Izzo to think critically about Vox’s principles. “First I thought, It doesn’t matter as long as [investors] don’t have a say in what we do,” he says. “But then someone asked, ‘Would you take a drug lord as an investor?’ Of course not. So there is a line. But where do we draw it? Do you take money from companies involved in corruption scandals in Brazil? Or from sons and daughters of top executives in those companies?”

Similarly, Bernardo Bonjean, who founded the Brazilian microfinance organization Avante in 2012, instituted a monthly breakfast where employees could come together and ask him questions. He also shares what’s on his mind in letters to employees, discussing everything from the company’s KPIs to his concerns about cash flow in the coming months. Okhuysen and Orellana put posters showing a matrix of Oftalmología salauno’s four core tenets—commitment, service, reach, and value—in every meeting room. They can refer to these tenets when decision points arise, supporting a shared language among employees.

To encourage questions from employees, it’s important to create an environment where people feel safe raising contentious issues. And when employees see changes in thinking and processes result from these discussions, they know that what they say is valued.

Events and conversations aren’t the only ways to socialize employees. Promotion and compensation are also important. At the multinational cooperative bank mentioned above, being promoted to general director of a local branch requires excelling in business development, cost reduction, and profit making while also demonstrating a clear adherence to the company’s social goals and a willingness to work collaboratively. One candidate for promotion commented, “I have seen many brilliant people fail because they did not embrace our values enough.”

Vox Capital, like several other companies we studied, bases individual bonuses on both financial and social performance. Furthermore, Izzo is clear that he does not want the economic inequality that Vox is trying to redress in Brazil reproduced inside the company itself, so the maximum difference between employees’ highest and lowest salaries and bonuses is capped at a multiple of 10. (In the United States in 2017 the average ratio of CEO-to-worker compensation was 312:1, according to the Economic Policy Institute.) Other companies, such as Revolution Foods, use shared ownership to motivate employees and increase their commitment to dual performance. Any full-time employee can become a shareholder through stock options. Richmond and Tobey believe that sharing ownership with employees, many of whom live in the low-income communities the company serves, is integral to their social mission.

Practicing Dual-Minded Leadership

Leaders must manage the tensions that inevitably crop up on the path to achieving dual goals. These tensions often involve competition for resources and divergent views about how to reach those goals. Leaders must affirm, embody, and protect both the financial and the social side and address tensions proactively.

Making decisions.

Strategic decisions should embody dual goals. Whereas goals reflect aspirations, decisions provide real evidence of leaders’ commitment to achieving specific aims. The experience of François-Ghislain Morillon and Sébastien Kopp is a good example.

Morillon and Kopp created Veja in 2004 to sell sneakers made under fair trade and environmentally friendly conditions in small cooperatives in Brazil. When they realized that advertising accounted for 70% of the cost of a typical major brand’s sneakers, they made the bold decision not to advertise at all. That allowed them to sell sneakers at a price comparable to what their bigger competitors asked despite having production costs five to seven times as high. To make up for the absence of traditional advertising, the company formed strategic partnerships with high-end fashion brands such as agnès b. and Madewell and stores such as the Galeries Lafayette to increase media exposure, grow sales, and become profitable.

At first Veja’s clients—shoe retailers accustomed to the marketing of major sneaker brands—were skeptical. So Veja trained salespeople to educate them about the benefits of its product for people and the environment. Clients and the media now view the “zero ads” decision as evidence of the founders’ commitment to their social goals, ultimately both giving the company social impact and making it profitable.

Morillon and Kopp also decided to temper the company’s growth, despite increasing consumer demand in the United States. They refused to lower their fair trade and environmental standards to sell more shoes. Instead they decided to set production targets in keeping with the capacity of their fair trade partners while working closely with them to increase that capacity, ensuring a growth rate compatible with financial sustainability. That decision demonstrated, to employees in particular, the genuine commitment of Veja’s leaders to their dual goals. In making bold decisions, the cofounders both emphasized the company’s priorities and created the conditions for achieving them. They also showed that it’s possible to avoid one of the most common pitfalls for dual-purpose companies: prioritizing profits over society when the pressure is on.

Veja boldly decided to do no advertising, which kept its sneakers affordable.

Profit allocation is another important area of strategic decision making. Dividends can be capped to ensure that financial goals don’t overshadow social ones. When founding Oftalmología salauno, Okhuysen and Orellana pledged to reinvest 100% of their profits for at least seven years, so the investors they selected—a social impact fund, the World Bank, and a private wealth-management fund—knew that no dividends would be paid during that time. Okhuysen explains: “Our investors ultimately expect both financial and social returns on their capital. But the alignment between us around reinvesting profits to improve and grow our network of eye-care clinics has helped ensure that financial goals do not take precedence over our social purpose.”

Engaging the board.


In successful hybrid companies, board members serve as guardians of the dual purpose. Thus they must collectively bring a combination of business and social expertise to the table. Diversity on the board is important for drawing the organization’s attention to both social and financial goals, yet it increases the risk of conflict, because members with different perspectives are more likely to differ as to the best course of action. We have seen some companies experience near-paralyzing governance crises when socially and commercially minded board members with similar levels of influence strongly disagree.

Yet other companies have managed to avoid such crises because a chair or an executive director systematically bridged gaps between the two groups. By fostering regular interactions and information sharing between them, such leaders enabled the groups to develop mutual understanding. Recall the subsidiary Jean-François Connan founded at Adecco. He invited representatives from prominent local nonprofits to join the board as minority shareholders, enabling the company to benefit from their social expertise, networks, and legitimacy and helping to protect the company’s social mission. His hybrid experience put Connan in a good position to bridge the gap between the two groups of directors, fostering common ground by constantly reminding each of the importance of the other.

CONCLUSION


Some major roadblocks to dual-purpose organizing are outside a company’s control. Chief among them is that the business ecosystem is still set up to prioritize the creation of shareholder wealth. The Global Reporting Initiative, the Sustainability Accounting Standards Board, and B Lab, among others, have taken steps to overcome some of these barriers. Each of them has created metrics for tracking companies’ impact on the lives of employees and customers, the communities served, and the environment, providing organizations with benchmarks. What is at stake is ensuring that companies don’t pick and choose areas of social focus on the basis of convenience.

Rating agencies are only one part of the ecosystem, however. Although more changes are under way—such as awarding legal status to public benefit corporations in the United States, community interest companies in the United Kingdom, and società benefit in Italy—the regulations, educational standards, investment models, and norms that govern the production of economic value and social value are still mostly distinct from one another. As an increasing number of companies engage in hybrid organizing, the systems that support business also need to change.

But changing organizations and the ecosystem that surrounds them is difficult. Companies must fight the inertia of inherited ways of thinking and behaving. Trade-offs and tensions are inevitable, and success is more likely when leaders address them head-on. The four levers we have outlined are meant to help.

A version of this article appeared in the March–April 2019 issue (pp.124–133) of Harvard Business Review.