The word “disruption” has become synonymous with technology companies and other start-ups hoping to be the next success story. As well as its positive connotations in this space, it can also feel aggressive and unsettling.
Whilst a disregard for the accepted ‘rules’ is essential for innovation, when those rules are governing the relationship between a company and its people, this will undoubtedly be less celebrated. Is it now possible to be an ethical disruptor?
Fast-growth companies are often grouped under one umbrella, assumed to have a similar attitude to business and common objectives. Looking closer, there is a dichotomy emerging, of those founders looking to scale up and sell out at the earliest opportunity, and those with a long-term vision who prioritise a core purpose.
Such a dichotomy can translate to the way in which a company’s workers are treated; as a disposable business resource, or as key stakeholders in the company. In business-peak, this divergence has given birth to two characterisations in particular: “unicorns” being the super-fast growth private companies that have raced towards a $1 billion valuation, and “zebras” tending to be businesses following a more sustainable, collaborative and purpose-led approach.
In an economy that is increasingly dependent on the provision of services and ideas rather than goods, a company’s people will often be its most important and defining asset. It is increasingly evident that in order to retain talent and grow a sustainable business, employees need to be treated as valuable stakeholders. However, encouraging such an approach may require a wholesale change in corporate governance.
This wholesale change was one of the motivations behind Taylor Vinters’ decision to create its own Zebra Project. The Project brings together business leaders, creative thinkers, academics and visionaries to shape the future world of work through a series of engaging debates.
The Unicorn Phenomenon
The Unicorn businesses most people will be familiar with are household names: Facebook, Uber, Deliveroo and Airbnb. Such businesses are often accused of prioritising commercial success above all else, while benefiting from disrupting their marketplace by taking a radically different (usually internet-enabled) approach to competitor offerings. However, in challenging perceived norms many have also been found to have fallen foul of regulations and/or acted inappropriately, whether commercial regulation, or consumer and worker protections.
The financial success of certain unicorns (e.g. Uber, Airbnb, Deliveroo) can sometimes be credited to their innovative business models and the way in which they engage their workforces to respond to customer demand in the so-called ‘gig economy’; a contractor workforce that flexibly provides their services, often forming a patchwork of freelance income streams.
Indeed, gig economy unicorns’ relationships with their workforce provide a useful lens through which to consider the phenomenon.
These new business models rely heavily on being able to engage workers in a flexible way in order to provide on-demand services. Being able to work flexibly and choose when to work can be very attractive to individuals who may have another job, family commitments or studying to work around.
However, in some cases the desire for flexibility has had the result (whether unintentional or planned) of leaving workers with reduced rights. This has led to an apparently continuous stream of cases of worker misclassification in UK tribunals and across the globe, often involving unicorn businesses.
These disputes, alongside concerns such as the inappropriate harvesting and sale of data (e.g. Facebook/Cambridge Analytica), have the full attention of the British media and have captured public imagination. It is no surprise that unicorns, and their approach to business, are now being critically examined.
Rise of the Zebra Movement
Frustration with the stereotypical unicorn culture led to the birth of “The Zebra Movement”. Brandel et al, exasperated at Facebook being “weaponized to spread fake news” and Uber’s “toxic workplace culture”, claimed an animal of their own to describe “profitable businesses that solve real, meaningful problems and in the process repair existing social systems”.
Proponents of zebra companies believe that ethical corporate governance and business success are not mutually exclusive and that commitment to one is not at the expense of the other. This is encouraging a movement away from employees being simply seen as a human resource. They are not just seen as assets, or numbers, they are recognised as people.
“Mobile zebras – If Uber is the archetypal unicorn, Gett is its zebra equivalent. Whilst Uber’s driver entry requirements are relatively light touch, Gett uses established fleets of black cabs in London and prides itself on the quality of its drivers and standards of safety. Whilst Gett would still be enthusiastically described by its management as a “disruptor” it has tread more softly than Uber. It operates in fewer jurisdictions, seeking to work alongside, rather than clash with, local regulators. Whilst Uber remains dominant in many territories, it will be interesting to see who wins the marathon – the unicorn or the zebra.”
Whilst The Zebra Movement was a reaction to the unicorn concept, the approach is far from new. For instance, going right back to the late nineteenth century, the Cadbury brothers sought to prioritise the welfare of their people, building the Bournville estate to house hundreds of workers in order to improve their living conditions. This was driven not just by Quaker values, but a commercial recognition of the value of their workforce. Cadbury staff were seen as key stakeholders and essential to the success of the product.
Ethical Corporate Governance: Legal Overhaul
So why are more companies not disengaging with the unicorn way of thinking and becoming more zebra? Brandel et al believe that “zebras struggle for survival because they lack the environment to encourage their birth, let alone to support them through maturity”.
The political thinker and economist Will Hutton expresses similar frustrations and suggests that “our private institutions do not provide sufficient public good to justify their unreformed autonomy”.
Hutton recommends an overhaul of UK company law in order to “set out unambiguously what society expects from companies in exchange for the privileges [(e.g. the protection of limited liability)] they are afforded”. His idea is that a company should be required to set out its purpose and be held accountable, with an annual requirement to report on the company’s commitment to its purpose. He comments that it should be “through delivery of their purpose that [businesses] should seek to make profits.”
Indeed, it may be that the UK corporate governance framework is holding zebras back. Contrast this to the US, where it is more common for a company to have greater flexibility in its share structure when going public.
Flotation in the US allows certain classes of share to carry more voting rights, meaning that founder shareholders are able to own a small proportion of the issued share capital, yet still maintain control of the company. This means that if the founders choose to do business in a certain way, it will be easier to maintain such a culture even if the company is predominantly owned by corporate investors. On Google’s initial flotation, the founders retained shares that carried 10 votes per share and issued shares to the public that had only 1 vote per share. On Google’s initial public offering, the founders explained:
“we have set up a corporate structure that will make it much harder for outside parties to take over or influence Google. This structure will also make it easier for our management team to follow the long-term, innovative approach.”
This flexibility was also part of the Glazer family’s motivation to float Manchester United in New York, rather than on the London Stock Exchange, given their desire to retain control over key decisions.
Be More Zebra
As Douglas Adams wrote, “predict[ing] the future is a mug’s game. But increasingly it’s a game we all have to play”. That said, it seems likely that zebras are here to stay – sustainability, after all, is core to the model.
Corporate governance reform is likely to make for more verdant pastures, but, assuming such changes are unlikely in the short term, there are various practical measures businesses can take to be more zebra.
They all revolve around putting staff at the core of the organisation, and are not new concepts – to take just a couple of obvious examples, one might choose to incentivise workers by sharing equity, or to look to work with staff to make flexible working beneficial for both the business and individuals
The key, as ever, is to encourage open communication between the business and its people – sharing ideas, concerns and (ideally) a passion for the organisation’s purpose.