Case study: Inclusive capitalism at Legal & General

Written by
Sarah Wild, Editor, Changeboard

14 Mar 2020

14 Mar 2020 • by Sarah Wild, Editor, Changeboard

We spoke to Legal & General’s corporate affairs director John Godfrey and group HR director Emma Hardaker-Jones about the practicalities of pursuing profit and purpose. 

How would you define your corporate purpose? 

JG: To improve the lives of our customers, build a better society for the long term and generate value for our shareholders. We operate through a lens we call ‘inclusive capitalism’. There’s no zero-sum game between commercial success and being socially useful; especially over the long term — and we’re a very long-term business, looking after people’s pensions and investments. 

Yes, we have to make the returns for our shareholders, but we also have to be inclusive and socially useful. We invest the large amount of money we look after, not only where it will make a good return, but where there are social benefits; for example, in urban regeneration, social housing and infrastructure.

EHJ: This isn’t a response to a fad; it has been at the heart of what our CEO has been driving since he took over eight years ago. It impacts everything we do and it’s how we describe the company to employees, prospective employees and to investors and other stakeholders. We have three values: straightforward, collaborative and purposeful. 

Could you give an example of your purpose in action?

JG: In Croydon, south London, we invested £45m in housing for homeless people, alongside the borough. We bought 170-plus homes, leasing them to the council, which was then able to supply housing to homeless people for less than their housing allowances. It meant a financial gain for the council, a commercial return for us and the principle beneficiaries were the homeless people who had roofs over their heads. 

EHJ: We also have a fantastic story about an adult with severe learning disabilities living in a property that he was about to have to sell. Our team and his community got involved to help him and he was able to get a lifetime mortgage that allowed him to renovate what was a very dilapidated property. 

How do you communicate what you stand for to your people?

EHJ: We see strong scores in our engagement surveys against things connected to purpose and communication, but we continue to work on it, because purpose can become very intellectual as a concept. Our purpose should have as much meaning for someone sitting in a call centre as someone in strategy in our head office. 

The mistake organisations often make is thinking “we’ve talked to people about this once, so everyone must understand it”. We’re making this a part of our drum-beat of communication, relevant to all our audiences. 

JG: People also tend to read what is written about us externally. They like to see evidence that we are really doing things. I think people are smart enough to see through it if it’s just people talking the talk.

And how do you bring your purpose to life for staff?

EHJ: We tell stories about what our purpose means in reality and are doing a lot of work on our employment brand, around our own story. We’re asking people across the organisation to tell their own stories of why they joined and what they contribute. 

We also empower our staff to deliver purpose. For example, an initiative among our call centres allows people to make a small gesture if a customer is going through a tough time. They don’t need to justify that spend; they could choose to send them flowers or a hamper. 

Are your people measured around purpose?

EHJ: Very explicitly. For our executives, 10% of their bonus is measured on culture, with another 10% linked to strategic objectives. So, over and above delivering the business, about a fifth of senior people’s bonuses is connected to not just what they do but how they do it. 

Does your social purpose support recruitment?

EHJ: When I interview people, almost without exception, they talk about our social purpose. 

There’s often a debate about ‘purpose versus profit’ – we think it’s both. We have almost a decade of double-digit growth. Having a strong purpose gives us clarity in what we do and how we do it and that comes through strongly to candidates. 

JG: We’ve recruited a lot of smart people out of the banking world who decided they would earn a bit less money here, but that what they did felt more meaningful. 

Why isn't everybody working in this way in your sector?

JG: In part, because we have a company structure facilitating it that I think is unique. It’s about the way different bits of the business work together and about the long-term investment at the heart of the business. But the world is kind of moving in our direction – which is very satisfying! 

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