Triple-up your relationship happiness

There are plenty of reasons to be positive about the state of business and management, writes Phil Preston, particularly in the intermingling of government, corporate and non-profit sectors.

Three reasons to be cheerful about the state of the world.

A good news day is overdue. I’ve had enough of hearing about our patchy economy, political skulduggery and corporate shenanigans. In fact, I’ve started watching the infomercial channel on TV lately, because at least the actors give 110 per cent and smile whilst pivoting, arching and rotating on the latest 'you-beaut' fitness gadget.

There is good news to be found though – it lies a little under the surface – but it is there.

Historically, we have seen a portion of businesses exploiting the lack, or insufficiency, of rules and regulations; turning a profit for a subset of citizens (shareholders) at the expense of others. The business sector has formed only tepid relationships with non-profits, in as much as to absolve themselves of guilt and secure their licence to operate, which is akin paying off the mob for protection. Turning to the role of government, it has tended to deliver services inefficiently instead of facilitating the delivery of services.

With this tawdry past in mind, I took a look at the triangular relationship between the government, corporate and non-profit sectors with fresh eyes, and found that there are at least three reasons to be cheerful about the state of the world.

Reason 1: Government and corporations are becoming co-creators

The way that businesses create value has changed. The days of underpinning profit growth by the exploitation of resources such as land, people, water, minerals and fossil fuels, is coming to an end. Intangible assets, like intellectual property, human capital and relationships are the drivers of value these days.

The smarter operators have started re-inventing themselves. Doing things the same way would only result in heavy-handed regulation. This is why GE established its Healthymagination operation and set itself hard targets for lowering the costs and increasing the quality of healthcare – without compromising returns for shareholders.

In short, chasing the carrot is a superior strategy to avoiding the stick. Firms that fail to adapt could easily fall prey to the corporate undertakers.

Leading businesses, like GE, have responded on by placing community interests at the heart of their strategy, not at the periphery. They co-create value by aligning their objectives with those of government, and I’d bet London to a brick that they’ll trounce competitors who fail to follow the trend.

Reason 2: Corporations and non-profits are forming meaningful partnerships

Enter the non-profit – its time has come. Now that corporations can see benefits in forming meaningful community connections, they need experts who can help them navigate their way.

A representative of Dow Chemical recently noted that the NGOs they work with have great local knowledge and, combined with the fact that corporations know how to take things to scale, there is value for both sides in the partnering approach.

There may be natural, symbiotic relationships to be pursued, but it won’t be easy. Sustainable relationships are built on trust, reliability and strong communication skills. The ability to form enduring, effective partnerships will only increase in value.

In time, non-profit models will become a greater threat to traditional business. Social enterprise and cooperative structures can deliver products to market with lower financial overheads than for-profit business, and may pick off some low hanging fruit before they realise it.

In the meantime, the development of partnerships will make for interesting viewing.

Reason 3: Non-profits are acting as risk takers for government

Although this is the area I understand the least, it seems to make sense for government to move from being a deliverer of essential services to a facilitator of them. Government is about controlling risk; good service delivery relies, to some degree, on innovation and risk taking.

As we saw after the collapse of ABC Childcare, the GoodStart syndicate put together a complex partnership and financing structure to succeed in its bid for the business. In theory, non-profits should be able to deliver services with more efficiency; although there will, by definition, be failures to contend with.

Achieving collective impact from government and non-profit partnerships is all the rage, judging from the fervour generated for an upcoming conference. Perhaps it is fair to conclude that government is managing its risk by replacing direct exposures with indirect ones? It will need to result in higher service quality levels and competitive costs to be considered a success.

The desire to take this relationship more seriously is illustrated by the current reform agenda. Despite being large, the non-profit sector has lacked regulatory focus because of its diversity and fragmentation. The establishment of the Australian Charities and Not-for-profits Commission later this year will provide a central agency that is better placed to deal with the sector’s interests.

These three trends are all about connectedness, and being a partner, co-creator or outsourced risk-taker requires vision and new skills. Importantly, we should recognise that these trends are driven by real needs, our adaptation to a new paradigm and new circumstances.

A reviewer by the name of Orrin Keepnews, in his notes on the music of Thelonious Monk in 1966, remarked: "This is not a matter of choice, but of inevitability." The same can be said of the tightening of relationships between the government, corporate and non-profit sectors, and it is good news.

Phil Preston is a social innovation expert who provides strategic insight into the rapidly changing business and social environment. He can be contacted on phil@philpreston.co