Welcome to the ninth edition of transformation talks. My name is David Lancefield and I am a partner in Strategy&.
In this series of podcast, I talk to leaders who transformed their organisation, whether by defining a fresh purpose, developing a new strategy, inspiring innovation, or strengthening their culture.
Who better to talk to than Paul Polman, who was the chief executive of Unilever for 10 years until very recently. Paul is unquestionably one of the most impactful and farsighted leaders of our generation. A journalist called him the epitome of a 21st century CEO.
He shaped, what we now call responsible capitalism, pioneering new approaches to the sourcing of raw materials and packaging of goods, developing new relationships with suppliers, producing healthier products, and improving conditions for workers.
Unilever is now one of the most admired organisations in the world in terms of its brands, financial performance, and approach to sustainability.
Paul led the expansion into emerging markets, and the personal care market, completing more than 50 acquisitions.
He was the first chief executive to get on board the valuable 500 initiative, a global project that aims to put disability on the business leadership agenda, a cause very close to my heart. He has also emphasised the importance of talking to a younger generation, about creating a more ethical and responsive business culture.
Paul, you are most welcome, thanks very much for joining us.
Thanks for the opportunity.
Starting with the purpose. Purpose is a word I would associate strongly with you, purpose for yourself, for Unilever, for industry, the environment, and society. If I am right in saying that, where does your sense of purpose come from?
A sense of purpose is a continuous development based on many of the things that happen to you in your life of work, or your crucibles, if you want to.
In my case, I was born just after the Second World War. Believe it or not, with parents were deprived from their education, because of the war. All they were focused on was trying to ensure that there was peace moving forward. That their children got the education that they were deprived of, and that we had a better life than what they had to deal with. So, very much focused on the common good, and putting the interest of others ahead of their own. They met in boy scouts, so great lovers of nature and preserving the planet as well.
Then during your lifetime, things happen to you by choice or by accident that form you, and form your opinions about things and your purpose gets sharpened over the years.
Ultimately, you get to a point that you discover that you have to put the interest of others ahead of your own. And if you are in a position to do that and help others, then that’s a very sweet spot to be in.
Absolutely, when you are being challenged on that in terms of your position in any role you’ve been in, in terms of putting the interests of others, perhaps other organisations or the environment and society ahead of Unilever, what’s kept so true to your purpose when you are being challenged?
Keeping the bigger picture in mind that we are here to help the underserved and to ensure that this world functions for everybody, I think is a bigger picture.
The reason I stayed in Unilever for 10 years, was definitely the company’s credo, but also being able to use the size and scale of Unilever to have impact well beyond the company itself. This was obviously for me motivating up to a point. Now I need to move on and do other things.
It has been a tremendous help, a company that reaches 2.5 billion people a day with their products, and their basically in 8/10 households globally, the opportunity to touch more people than any government in the world is obviously an enormous force, if used for good.
The broader purpose that we’ve put out there of decoupling our growth from environmental impact and increasing our overall social impact is broadly embraced especially by the millennial generation that stands to be more purpose driven than others. So, actually the convincing is not the most difficult part. The difficult part is when you have your challenging choices, and a timeline, and a sense of impatience that might not fully match up.
So, how do you square these things, and it’s like anything else. You have to carefully plan things, have a 10-year horizon, 15-year horizon, and be careful that you do things in the right sequence and in the right intensity, when it’s the right time.
The millennials may get it, as you say, but may be not some of your stakeholders at the time going back to 2009. How did you go back convincing them?
The first thing is if you put your company to the service of society, which I think is probably the only way you can run companies, if you want to be around longer term. Then you have to define for yourself where you can make your biggest contributions, but we should think about all companies as striving to have a positive overall impact. If that impact cannot be defined or is not positive, you have to ask yourself the question of “what is your reason for being?”
The average lifetime of a publicly traded company in the US has dropped during my lifetime from 67 years to 17 years. I think one of the main reasons for that has been the myopic focus on the shareholders and the increasing short-termism that has crept in.
Some companies have tried to compensate for their own successes by moving into CSR or philanthropy and other things, but ultimately it still falls in the ‘less bad’ category, and clearly we are beyond the point that the world can afford that. So companies need to think hard about having a positive impact.
If they do think about these models, then their development agenda is a tremendous agenda of opportunity, and there is probably a bigger market out there waiting for them. And actually a very profitable market. So, getting companies into this shift in mind set from moving to corporate social responsibility, CSR, to what I call RSC: responsible social corporation, is perhaps a big step, but very rewarding if you do that.
There is no reason why companies can’t be more human either, and we somehow forgot that. Bringing companies back to humanity, what we’re all about, making positive contributions, trying to do that every day a little bit more, guarantees not only your long term reason for being, but also your financial success.
Fortunately or unfortunately, if you would argue both ways, but fortunately, we can prove increasingly that companies that run a more responsible business, that are more environmentally and socially responsible, investors who follow the ESG principles, now get the higher returns.
The reason I say unfortunately at the same time, is because I think we have waited too long to address some of these burning issues. We are at the point right now where the cost of not acting on issues like poverty or food waste or climate change is actually higher than the cost of acting, hence the attractiveness of the financial proposition.
Indeed, anchoring in the financial propositions is critical right, to get people in, maybe sceptical or just not moving. In the journey you just talked through, what was the hardest movement, not necessarily in terms of your purpose, which clearly comes through, but your mind set. You were going against prevailing wisdom or practice, what was the hardest part of it?
When I became CEO at the end of 2008, early 2009, it was the height of the financial crisis. Coming from a company into a company that you haven’t worked in, is obviously a challenge. What we saw was that as a result of the financial crisis, most of the companies were hunkering down cost saving programmes, etc. I was fortunate enough that Unilever was not in such a solid state, it hadn’t grown, so we put out a strategy, one of growing the company and having a broader impact, environmental, social, and economical, and so our strategy was probably differentiated from the rest.
Since, I wanted to be anchored firmly in the sustainable development goals and the development programme, we could not do that with a myopic focus on quarterly reporting. One of the first things I had to do was, not only send a signal, but create space for people. We abolished quarterly reporting, we abolished guidance and we sent a clear signal that we were there for the longer term. That obviously attracted a lot of sceptics and cynics. The stock price actually went down 8%, because people thought bad news would be coming if we did these things, but bit-by-bit we gained that credibility.
The programmes we put out, we really decoupled our growth from environmental impact, increasing the overall social impact. The most difficult thing is obviously internally getting everybody on board and aligned behind a programme like that, but also providing the capabilities to deal with some of these tensions, these trade-offs, the things that you can’t handle right away, but might do later, capabilities that need to be built. More importantly externally is probably a bigger challenge, because many of these objectives we set were so audacious, that from the beginning we already made clear that we could never do those alone and that it involved these partnerships.
And these partnerships require trust, require transparency. That’s difficult even for companies like ours. One of the reasons we put 50 targets out there was to create that trust and transparency, but it’s not that easy. To really get to the bigger changes of impact for humanity, even a company like Unilever alone could not do that. So the bigger challenge has been how to drive these more transformative changes beyond the company, get industries aligned. We defined what is competitive and precompetitive.
How do you move a whole industry out of deforestation? How do you move a whole industry to a circular economy? How do you get out of plastic issues that we see now? No individual company can do that alone. So, to form these alliances, increasingly with government civil society and the private sector, is obviously hard work, but it is an absolute must if we want to solve the issues that we are currently facing.
Absolutely, I see a number of organisations talk about being more open, more networked, whether through partnerships or alliances, but actually their practice is sometimes (whether consciously or unconsciously) more proprietary, i.e. they set the terms of the agenda. How did you shift that practise to become more partnership-led, to tackle the big problems?
Well the issues of poverty or the issues of food security or the issues of climate change, which is one of the biggest inter-generational crimes we are about to commit, are not proprietary to any company or another. In this, we are together, and if we don’t solve these issues together, none of us will benefit, and it’s obvious that we’re seeing the symptoms of that on a daily basis. So, how can we broaden that circle and create a tipping point is very much on my mind. How you go about that is obviously not easy.
In our industry, which is the consumer goods industry, we created an industry body, the Global Consumer Goods Forum, with all of the major retailers and manufacturers in the world, about 3 to 4 trillion dollars of retail sales, and tried to drive a common agenda. At that time, I was chairing the sustainability pillar.
So, how to get commitments against deforestation? 50%-60% of deforestation is driven by the enormous appetite for food, soy, beef, pulp, palm oil and all the other things, so how can you get the whole industry out of, what I would call, illegal deforestation, absolutely crucial for climate change. How can you get the whole industry to sign up to human rights standards like the Ruggie framework?
These are things that are hard work and since you deal with companies from all parts of the world, sometimes the perspectives are different, the timelines might be different. It is doable, and we are moving in the right direction, I would say, on many of these issues I have just briefly talked about. But at the end of the day, the scale and impact that count, that’s where we are still falling grossly short.
You talked earlier, Paul, about intensity of working at certain times of any change. Whatever you call it: change, transformation, your leadership working out when to get really stuck in, when to take or put off the gas, when to empower versus lead. How do you work that out, how do you work out when to really drive up intensity either in the organisation or your leadership team, versus actually then having some space to not necessarily step back, but maybe recharge or change gear, how do you work it out?
In the eye of the beholder, you would never probably find that right balance, because as soon as you dive deep into something, some people think you are micromanaging. If you are too far above and do the strategic things, people think you are too far removed from the business. So, it’s difficult to find that balance, but I think a good leader needs to be a T-shaped leader, being able to go up and down into the organisation and also broad. By broad, I mean, really being able to work in this partnerships that go well beyond your company.
So, a T-shape is probably the right way of doing things. When you go in deep, it's probably for your own understanding more than to influence the company. I could not have been part of developing the broader strategies if I didn’t know how things would land in the markets, or how it ultimately happens in a consumer’s home or on a farmers land.
So you need to be able to have an enormous appetite for the detail, especially in consumer goods to drive that sense of urgency, to make that purpose come alive with storytelling and many other things. Then I think, you need to have that broader picture.
I always believed that when I became CEO, even more so, that my job really is to make others successful. As a CEO, I quickly discovered that I don’t actually know much. My finance manager will know more about finance. Someone who runs Turkey, will know more about Turkey. Someone who runs the Dove brand, will know more about the Dove brand, etc. All you can do is be sure that they are successful and what you can do is help, because these people are often in the forest and dealing with the continuous battles that we find in the marketplace whatever they are, from geopolitical, to environmental, to competitive.
We have had 10 years of top and bottom line growth, which very few companies can achieve. Our shareholder return is 300%, and the only way you can do that is by continuously being a few steps ahead, in terms of these systemic changes.
When it comes to the systemic changes, and immersing yourself in the forest, in the problems, in the areas, how do you create space for yourself to do that? Other leaders I’ve talked to would start arguing, I need to be curious, I need to learn, but then either the immediate operational challenges sometimes get in the way. The analysts, they may have not done the same thing as you in terms of the reporting cycle, they get immersed in that, and actually they become an operational leader and sometimes that’s necessary, but they don’t become the transformational leader, how do you create the headspace?
First of all, as CEO, the best advice you can get from other people is that you manage your own agenda. Obviously everybody loves you, they want you to be on every panel. All the things you do are better than sliced bread, but you just have to not only stay human and find that balance in your life you are seeking, but also to manage your own agenda.
I am a big proponent of managing energy, not time. I think it’s very important that people get oxygen. Oxygen can come from different things. Obviously, we encourage people to read books, to participate in outside activities, to form alliances. I could never be a total slave to any corporate for that matter. I was very fortunate that at that time [UN] Secretary General, Ban Ki-moon asked me to be the business representative on a high-level panel that was established to develop the sustainable development goals and that gave me a lot of oxygen. I learned about a lot of the realities in the world, and connected to a lot of the issues that we need to address, somehow the shortcomings of our global scorecard. The more I learned about that, the more I also thought, ‘well isn’t it the responsibility of the private sector, to be a solution provider?’
Governments are clearly paralysed in today’s environment, that’s a reality that we can be cynical or bitter about, but it’s better to be realistic about that. Increasingly, you need the private sector to help unlock that political process. The funds that I needed to implement a sustainable development agenda now to alleviate poverty, are way beyond the means of any government. So, you need the private sector to step up, and it’s in the interest of the private sector. When they do that, they not only get validity or reputation, attract the right people, they might even discover that they can lower costs and risk. But above all, it’s an enormous area of opportunity. When you have 2.5 billion people not having access to sanitation and hygiene, that’s an enormous opportunity.
A brand like Domestos, which is a great toilet cleaning brand, has an objective to build 25 million toilets. But by simply doing that it’s motivating, and they get closer to the real issues. Their R&D and innovations become more relevant, and surprise these brands tend to grow faster and that’s what we’ve seen with Unilever. Brands with a strong sense of purpose tend to do better, not only in top line growth, but also in profitability, because they are relevant. We are moving quite rapidly into an environment where especially the millennials are more purpose-driven, and more and more people understand what needs to be done and will embrace these brands that provide these solutions.
It’s hard work, because the expectations change continuously, but I think what your role is as a leader, is to not only do well when your company is there, but to make sure your company does well 10 years after you leave and that’s what we have worked on. In our portfolios, in bringing purpose to the company, in changing the quality of the people and making it an employer brand in most of the countries where we operate. Then if you have smart people in your company, they will figure out any of the challenges, which are enormous nowadays. You can have an Arab Spring. You can have a climate change or natural disaster now every minute in every part of the world. Your supply chain is disrupted.
What people now have to deal with in running these businesses, it’s impossible to capture that in rules, laws, or regulations. So you have to create principle-driven organisations. Purpose-driven organisations, which are your true North or your beacons to go by, and that gives you the confidence that provides the glue and the trust for these companies to operate in what are increasingly complex environments.
As you say the scale of, in your case, Unilever, the complexity of the issues, and as you said diversity of different situations: geopolitically, industry dynamics, consumer dynamics, means that you have to tailor, you have to change and trust your people.
Absolutely, it can only be done on the ground. What you do as a leader is you strengthen the values on which this company operates, you ensure that purpose is shared, and then you provide the framework for people to be successful. But you have to trust them in the decisions they take and the trust can only come from transparency and from values. That’s the only glue that you have to keep these companies together. If you translate that into big Bibles, rules or regulations, you stifle innovation.
On the trust perspective of that, the micromanagement and the big rule book, how do you get the trust with accountability. Because you speak to some leaders and you hear from them, and they set out a big purpose, often not granular enough, they then underneath that actually put lots of rules in place. Sometimes that’s down to their lack of confidence in themselves, sometimes it’s that they’re not quite clear on how to translate the purpose into the day-to-day. How do you think about accountability then? So you’ve set the parameters, you empower the people, but there has to be accountability?
For sure, but I think about that on different levels, but indeed there are too many who ‘talk the talk’, but not ‘walk the walk’. I think increasingly that has been flushed out, because to some extent with the internet and social media, etc. Transparency, whilst there are downsides, this transparency has also increased. The answer first and foremost is in transparency. If you can create transparency, you actually drive behaviour, more so than not. So, for example, companies that disclose their carbon footprint, if you keep it at that level, tend to actually work harder on reducing their carbon impact, then companies that don’t disclose.
Behind the Unilever Sustainable Living Plan, we put 50 targets and these targets we published that created the trust, the transparency creates that trust that ultimately is the basis for prosperity. So you do the same in a company.
Reinforcing and self-regulating in a way, rather than having to say “you must do this at this time”.
Well, I don’t believe in that because slave labour was abolished a long time ago. For example, if you want to get it ingrained in the values of a company, you have to drive behavioural change, and you don’t do that with just setting simple targets. Many companies set targets on diversity, for example, and quotas. Interestingly, Unilever in my 10 years, moved from 37% women to 50%. Our board is now 50%. In fact, in our office environment, we probably have 65%. But it has never been done with quotas. But it has just been done by saying, by all buying into the fact that we should treat everybody with dignity and respect and follow through.
If people don’t do that, we lose transparency. We can see in over 10 year time period, who are the managers that have promoted a more diverse workforce, or not. Now you put things in place, for example, you have to put a meritocracy in place that people buy into. Performance assessment systems that people buy into, and some other pre-conditions around that. Enablers that are for everybody, that we call it, in this example, gender balance. We don’t have it for one or another. You make it a totally inclusive programme. The more you do that in a transparent way, we would make clear where one organisation is in one country versus another country, you actually drive that behaviour automatically. People don’t want to be on the bottom of the list.
If the systems are fair and you provide transparency, it actually drives behaviour.
As you rightfully said in your introduction that total inclusion, which really should drive humanity if we want it to function long term, also has to be in organisations. So, gender balance is there, but I am glad you also as an organisation and personally are a big supporter of the valuable 500 that we have created with Caroline Casey’s leadership. Because there are 1.3 billion people with diff-abilities [disabilities]. I call it ‘diff-abilities’ - different abilities. Some people call them handicap, but people with disabilities in this world, that would be 15% of the workforce, the world’s population. But you will find barely 1% [with disabilities] in a company, and it can happen to all of us tomorrow.
One of the reasons I championed amongst other things, diff-abilities, is just to be sure that we create these inclusive societies, which is also the driver for me of working on the development agenda.
My son is severely disabled, and you hear all the labels all the time about being disabled, “He can’t do this, he can’t do that”.
But actually the language, in your case, using diff-ability, can completely change the mind set of I hope in turn him, parents, and everything around him, to “what can he do”.
Which if you then aggregate that across an economy society, communities in whatever lens, you actually potential people to give more, take that one step forward.
Absolutely. It’s not the people that we call disabled that are disabled, it’s the people that call them disable that are disabled. The ones that don’t hear their cries to be included are the ones that are deaf. The ones that don’t see their possibilities are the ones that are blind.
So the disability is on our side - that’s why it’s diff-ability.
I am a very bad singer and I’ve never been called disabled. I’ve not been able to put one basketball through a hoop, but I’ve never been called disabled.
We can only make the world function if we have dignity and respect for every individual in this world. If we strive for equity, not equality, but equity. And if we operate with a high degree of compassion, which means putting ourselves in the shoes of the people that have not been as fortunate as we have.
If we don’t do that and drive these values of humanity, we slowly erode over time our reason for being. It’s very dangerous. That’s also why we have to speak out very firmly when people challenge that. As we’ve seen with some politicians lately. If we don’t do that and we stay silent, we become complicit to the same crime and bit-by-bit your society erodes.
If you can drive these same values into your company and the stronger values, there is absolutely no downside to that. And by the way your employees expect that and citizens of this world expect that as well, that companies speak up.
If you were coaching a new CEO in a large organisation, coaching them on how to use their opportunity wisely, carefully, thoughtfully. For everything you said, what would be the one thing you would call out that they should focus on?
The first comment I would say is, for leadership, is to be first and foremost a human being. The problem if you become CEOs of these big companies, you don’t take your Oyster card anymore and someone else carries your briefcase. You get separated from the long lines at the airport. You start to live in a world that is foo foo dust, but you think you are wonderful.
Fortunately, I come from a part of the country in the Netherlands where we keep both feet on the ground. [So my] first advice would be, be a human being. Then the second thing is what is your purpose? I’ve talked to so many CEOs and companies, and my first question always is ‘what’s the purpose of your company’? If you can’t verbalise the purpose of your company, what’s the purpose of having these companies there in the first place.
Then once you define your purpose, you have to live it. To run an insurance company that would not sell any of its policies to their own mother or to their own wives is not very useful, or to run a bank that drives people into poverty by mis-selling or misrepresenting some of their financial packages, is not very useful. I believe that one of the major reasons we have so much mental stress in society, is because people have values when they leave their homes and kiss their wives or their husbands and children goodbye, but then they come to work, and then all of a sudden different values and that creates an enormous tension. Why can’t we live with one set of values so we can be ourselves, so that we don’t have to wear a mask?
My first one is to be a human being and the second is to figure out what your purpose is and drive that into the company. So, you have to have leaders that are purpose driven. Then passion is obviously important. There are only three questions in life, what are you excited about, what are you good at, and what does the world need? If you can match those, you have a very successful life. So go to your passion.
Then the last thing is probably a positive attitude. You know the world of change especially if you make the dust versus eating the dust and carve the new roads, it’s not always easy, and it’s very unsettling or uncertain, nobody has walked it before. So, climbing a mountain is never smooth, you need some plateaus or some bumps to hold yourself on to. So, the best way to endure all of that is to keep a positive attitude, so purpose, passion, positive attitude and stay human.
That’s really fundamental. Paul, it’s been wonderful and inspiring to speak with you, learn from you. I love the way you frame the opportunity we have. Actually responsibility, necessity and your clear cogent advice for leaders, whether millennials, all the way through to CEOs of other corporates. You have the opportunity to do something now to avoid that all the things that could happen, it’s an incredible opportunity.
Frankly I could have been born in many places of the world and I would be dead by now. If you are in a fortunate position like many of these listeners are, you only belong to about 2% of the world population. If you belong to that 2% of the world population, then it’s your duty to put yourself to the other 98%.
Once the Dalai Lama had said, ‘if you seek enlightenment just for yourself to enhance your own, you miss purpose, but if you seek enlightenment to serve others you are with purpose.’ So I hope that at the essence of what we are facing in this world is a crisis of morality, where people put their own interests ahead of others. As I said before, greed might be good, but generosity is better, so live a life of purpose and you will not regret that.
Paul, absolutely brilliant.
Incredibly moving and a clear agenda, just things we need to do, so reframing how we live our life, let alone corporate life, it’s about how we as individuals act.
Absolutely, it’s a moral crisis that we are facing actually more than an environmental, or any other crisis, or financial crisis, or economic crisis, or political crisis.
But it is up to us as individuals to address it.
And the ones that do will be well off, the ones that don’t will be dinosaurs, I wish them luck.
Paul, thank you.
That was another edition of Transformation Talks with me David Lancefield.