Societal volatility is one of the biggest risks to business performance, therefore, executive leaders must plot a future-fit strategy on how to deal with social fractures.
Social fractures are divisions in society, causing people and institutions to disengage with one another, engage only in a polarized way, or act negatively toward the common good.
A Gartner survey of 273 board of directors from May through June of 2021 found that 57% of respondents listed an economically and politically polarized society as the most important risk to the business.
“Knowing how to act, and on which social issues, is not obvious or easy for leaders today,” said Frank Buytendijk, distinguished research vice president analyst and Gartner Fellow.
He added that social fractures such as economic, technological and cultural inequality — and companies’ responses to them — can affect brand and reputation dramatically, making social fractures detrimental to business success.
“Executives responsible for enterprise strategic planning and execution should pay close attention to the voice of society, and it should be a strategic goal for every business to help prevent and fix social fractures,” said David Furlonger, distinguished research vice president analyst and Gartner Fellow.
Gartner examined four scenarios to help executive leaders and their organizations succeed by sensing and responding to social fracture (see Figure 1).
In determining how leaders can sense and respond to social fractures, Gartner analysis revealed two critical uncertainties:
Social cohesion – Will society unify around a common set of social purposes, or will it be more a case of social fractures, continuously, and more polarization in each case?
Voice of society – To what extent will the voice of society become decisive or inconsequential to the business?
Get with the program
In this scenario, the voice of society is decisive, and society is united, too – it knows what it wants. Most businesses will contribute to a focused set of goals. However, it can also become totalitarian quickly: Businesses not contributing can easily get cancelled.
“’Getting with the program’ basically rejects individuality in favour of the greater good of society. This is stakeholder capitalism on steroids,” Furlonger said.
He added that companies in this scenario must build trust in their communities and reassure stakeholders that the company is looking beyond profits and moving towards activities that benefit the greater good.
Play to your purpose
In this scenario, society is powerful, but it is also divided over what it wants, leading to parallel societies where different groups have their own purposes, markets, and social filters.
The disadvantages for a business are that the addressable market is smaller, and large corporations need multiple brands to address multiple purposes.
The advantage, particularly for smaller companies, is that purpose-driven businesses can create high barriers to entry for competitors.
“Companies must realize in this scenario that whatever their purpose or social cause, they must be prepared to go all-in,” Buytendijk said. “However, in this scenario, society can be volatile. New forces can appear out of nowhere demanding attention and response. This can be a huge distraction for the business.”
Mind your own business
In this scenario, the voice of society is inconsequential, but the voices of the customer and shareholder are much louder. Society is divided over what it wants. There is no reward for businesses to be socially active. Many companies may have tried but didn’t find it to be competitively differentiating or profitable.
“Executives steer employee communication away from social issues in this scenario and focus on business outcomes. They emphasize everyone’s critical role in delivering profits,” Furlonger said. “These companies are more market-driven and less influenced by what’s going on in society.”
Wait for It
In this scenario, society knows what it wants, but nothing happens. The voice of society is inconsequential. There may be multiple reasons for this.
Perhaps a theme emerges that is bigger than social fractures, such as an economic crisis, which means that businesses have other priorities. It may be that everybody is waiting for everybody else to react. Or society’s traditional change drivers, such as politics, do not function properly.
“When companies do decide to speak out in this scenario, they must make sure that they can execute based on the customer and employee expectations the company has set,” Buytendijk said. “Don’t think that just paying lip service is sufficient. It can backfire and isn’t authentic. When companies can’t act immediately, leadership must explain why.”