Phillip Ullmann: “Businesses need to generate profit, that’s obvious, but we have to ask: ‘To what end?’”

Chair of the board

5 min read

After joining the family business in 1996, Phillip Ullmann grew Cordant Group’s revenues to circa £850m in 2017. Then, he transformed the company into the UK’s largest Social Enterprise. In other businesses, he’d be called the Chair. At Cordant Group his title is Chief Energiser and he’s “also a citizen, so I know that my organisation does not exist in a vacuum. I am part of society and so is my business.”

The biggest transformation in your business is its switch to a social enterprise. What’s the most important change you’ve seen so far?

It was hard enough to implement the change in our family-owned company, as even my own parents had strong reservations! Since moving to the social enterprise model, we’ve capped dividends, capped salaries at the top, and we’re looking at improving profit sharing.

It’s not easy, and isn’t going to happen in a few minutes. But we’ve started having painful discussions, such as: “How much should a director get paid?”, “Does anybody need a billion pounds?” — and putting these in the open.

I don’t want to force my views upon the board, but I want it to have these discussions. Because, when you start doing so, you quickly realise that many things we accept as a fact of life — including massive inequality — cannot be rationalised or justified.

Today, we try to be guided by three principles:

  1. Purpose before profit — that’s self-explanatory;
  2. Prosperity for all — that’s saying everybody matters;
  3. Covenant beyond contract — that’s moving from transactions to relationships.

 

What advice would you give to CEOs and Chairs who want their organisation to have more impact on society, but whose businesses aren’t explicitly providing a social good?

It’s nigh impossible for an existing company to do it on their own at the moment. We need to persuade the legislator first, and all our efforts should go into changing law to give primacy to purpose. Only then can you have sustainable change, and not temporary measures within a few organisations.

When you look at the work of enlightened capitalists — Robert Owen, John Mackey, Paul Polman… —, the story invariably follows the same pattern: however well-intended the leaders are, in the end, their work is always undone by the shareholder primacy system. And it’s inevitable, since directors are doing their jobs, and they have a duty to maximise shareholder value.

Of course, companies need capital, and shareholders are entitled to a fair return. But they’re not the owners of the business — that’s a misnomer. Shareholders have no duties to anybody, not even the company’s own assets. How could you own a company if you don’t have a duty to look after it?

In a true sustainable model, you share both the upsides and the downsides. To deliver what society needs, I think every business will have to become a social enterprise — and it can’t be optional.

In the meantime, I’d advise CEOs and Chairs to start truly engaging with all their stakeholders, and not just their shareholders. Ask the tough questions. If you’re a food retailer, for example: “Have we got a responsibility to encourage healthy diets?”

By doing so, you give employees, providers, and consumers a voice, and this helps put the focus on people, relationships, and purpose. And if you’re unconvinced by the moral aspect of it, there are also tangible business benefits:

  • You create a sense of community, by involving people on a regular basis;
  • You cultivate humility, by reminding the team that none of us has all the answers;
  • You educate yourself and others, by asking everyone to understand issues;
  • You get close to the problems, by empowering those on the frontlines;
  • And, finally, you open the door to creativity, by adding new individuals and approaches to your processes.

What are the smaller steps that you’d like to see from government in the short term?

The biggest change would be updating Section 172 in the Companies Act to go one increment further, by giving primacy to social purpose over commercial purpose. Businesses need to generate profit, that’s obvious, but we have to ask: “To what end?”

It’s like the air we breathe: we need to breathe in order to live, but we don’t live to breathe. Profit is only a tool to deliver the purpose of a business — which can solely be done if we have a non-financial purpose in the first place.

I don’t believe in a big state, but I believe the state can create an environment that promotes that way of thinking. The government’s area of expertise isn’t decision making, it’s framework making.

How do you make for an effective meeting and an effective discussion?

There are three ways to make decisions:

  1. Hierarchically, where you impose your decisions. But you can’t make all the decisions for the world from your ivory tower and expect them to be consistently good and relevant;
  2. Consensus, which sounds lovely on paper, but where one person can block the whole thing. Not to mention that you end with situations where there’s no accountability, because you have to implement the results of the vote even if you were against it;
  3. The advice process, where anyone within a self-managing team can make a decision, on the condition that they consult with two groups: everybody impacted by the decision, and everybody who has advice to offer. They don’t have to follow that advice, but they have to give them a voice and take them into account.

We rely heavily on the advice process, because we believe decisions made at board level are often too remote, and that the vast majority have to be made at the coalface. That’s why I’m not a Chair, but a Chief Energiser. There are some key, significant decisions that fall onto my laps, but they’re not many. My primary job is to create an environment where others thrive.

We go around the table and each member raises the issues that they feel need to be raised. We give people the space, let them talk, and often end up pushing decisions back down into the organisation.

Finally, we have an advisory board challenging us around our social purpose. We need their advice, but we’re very careful not involving them with decision making — otherwise, there would be a conflict of interest and they wouldn’t be able to hold us to account.

What book is on your bedside table?

Reinventing Organizations, by Frederic Laloux. That’s where I learnt about self-managing teams and realised they were the key.

What advice would you give yourself if you were starting out again?

We shouldn’t have to apologise to say we need to be focused on people — because that’s what we all are; people. Had I realised that earlier, I would have gotten into social purpose well before I was 51.

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