Further evidence that a focus on the accountancy-based bottom line does not maximise financial results has come in new US research. The Universities of Pennsylvania and Arizona State West and the Thunderbird School of Global Management, carried out a survey of 520 businesses in 17 countries.

It separated the firms according to whether the CEO was focused on profits only, or whether the chief executive balanced the concerns of customers, employees and the community. It found that the latter had stronger financial performance, as well as better relations and reputation.

One of the causal factors of lower-than-expected returns in the organisations with the ‘profit first’ CEO was a dip in employee engagement. According to a summary of the research, published in the Harvard Business Review: ‘When the CEO makes it a priority to balance the concerns of customers, employees, and the community while also taking environmental impact into account, employees perceive him or her as visionary and participatory. They report being more willing to exert extra effort, and corporate results improve.’

HBR Reprint F0912B