Author: Dennis Nally, Chairman, PwC International Ltd.
At the end of June 2016, I’ll conclude my tenure as Chairman of PricewaterhouseCoopers International Limited, after two terms lasting a total of seven years. The world has changed dramatically since I became Chairman in 2009 – and even more since I joined the firm in 1974. In my view, as I prepare to leave the profession, there’s never been a better time to join it.
Why? Let’s start by taking a look around us. It’s a world where everyone has a mobile device and old certainties about society and business are being subverted by the day. Where the global population rises by 145 every minute, where 1.5 million people migrate to cities every week, and where emerging economies are rapidly overtaking the ‘developed’ world in purchasing power.
It’s all a far cry from my first day at PwC, when the invention of the World Wide Web was still 15 years in the future and mobile computing was in the realm of science fiction. Today, the implications of ubiquitous mobile connectivity – and the future world we’re all using it to create – are only gradually becoming clear.
But here are a couple of pointers to where we’re heading. According to the recent PwC global Pulse Survey, 85% of CEOs see more interaction with consumers as a result of being connected. And by 2025, just five sectors of the sharing economy – peer-to-peer accommodation, car sharing, peer-to-peer finance, music, TV and video streaming, and online staffing – could be generating collective global revenues of some US$335bn.
The rising importance of purpose and values…
Looking across such developments, we can pick out five global megatrends that are disrupting societies, economies and organizations worldwide: demographic & social change; shifts in economic power; rapid urbanization; climate change & resource scarcity; and technological breakthroughs. All of these megatrends – and the collisions between them – are driving profound and sweeping change. No area of life or business is immune, and our own profession – across assurance, tax and consulting – is no exception.
As this maelstrom of change plays out, perhaps the biggest shift affecting our profession is that people today expect more from business than ever before. In an environment of unprecedented transparency and constant scrutiny on social media, business is expected to play a role in society beyond generating profit for its shareholders – and to contribute visibly and actively to helping to tackle pressing global problems ranging from climate change to inequality.
One frequently-cited manifestation of these rising expectations is a decline of trust in business and other institutions in the wake of the global financial crisis. But while the new demands placed on business clearly raise challenges, they also open up massive opportunities for those businesses that rise to them.
What opportunities? By having a positive impact on society, communities and the environment, companies can demonstrate a core underlying purpose and related set of values that go beyond making money. And by continuing to behave authentically in line with purpose and values, a business can build trust progressively over time while also trading profitably in commercial terms. As these dynamics have evolved, and the importance of companies’ core purpose has grown, so the focus has shifted from what business does to how it does it – and at what cost to others.
…brings major implications for our profession
What does all this mean for our own profession? The effect is that we now have a vital role to play both in exhibiting our own purpose and values in everything we do, and in helping other organizations do the same. And our profession’s ability to deliver on both counts is increasingly driven and shaped by technology and transparency.
Let me use PwC as an example. We’re currently re-visiting our network’s values through a major consultation with partners and staff worldwide. I see values as being the cornerstone of success.
These values in turn support a purpose: to build trust in society and solve important problems. Again, we strive to express this purpose through everything we do. In my view, having a set of common values and a publicly-stated purpose is vital for any organization to remain relevant, embed a positive culture, and create a workforce who feel confident and supported in doing the right thing.
However, it’s inevitable that trying to do the right thing will create challenging issues in some areas – with one of the most prominent being the question of what moral obligation there exists when advising clients on tax. Here I believe we have a responsibility to ensure we discuss the wider perspective with clients, exploring not just what they can do within the rules, but how any course of action will be viewed by their wider stakeholders. In this way, we can help them decide what ‘the right thing to do’ means for their various stakeholder groups, and by extension for their business.
The changed CEO environment…
Ultimately, of course, a business’s decisions on tax – and indeed on any other issue – should be guided and sharpened by its core purpose. In my view, the successful organizations of the future will be those that have a clear purpose, articulate it well, and embed it at all levels throughout the business.
This is a message that’s getting across to business leaders. The latest PwC Pulse Survey shows that nine out of ten CEOs worldwide say their organizations have a clearly-stated and defined purpose – a finding that’s consistent across all regions and sectors. But while they care about purpose, they’re struggling to scale it up and translate it into concrete values-led actions, behaviors and decisions. And if a purpose isn’t driving behavior, it risks becoming a slogan.
Our research confirms that in many cases this risk is very real. Only one in five CEOs strongly agree that when a crisis arises, their company's purpose always comes first in their decision-making. One third cite embedding stated values that influence employee behaviors as the issue that requires the most effort – and only half say employees will be positively viewed for acting in accordance with those values. Perhaps most tellingly, two-thirds say legacy culture and old ideas are hindering new ways of doing things.
All of this underlines the scale of the task facing today’s CEOs, as they strive to reshape companies that were originally built on delivering profit alone, into ones where profit and purpose combine. It’s a transformation that won’t be quick or easy. It’s taking place amid close scrutiny from a widening range of stakeholders – from regulators to non-governmental organizations (NGOs) to social media bloggers – all seeking greater transparency and accountability. But it's also a change that’s clearly under way, that businesses must keep pace with, and that our profession has an opportunity and duty to support.
…requires a new model for building trust
For this fusion of profit and purpose to succeed in recalibrating public perceptions of business, we’ll need a new model for building trust. As skeptical stakeholders struggle to keep up with headlong change, companies can no longer rely on trust they’ve earned in the past. Instead they’ll need to re-establish trust continually as they transform and enter new markets. This means organizations can innovate and grow more successfully by having a better understanding of the drivers of trust, and by providing stakeholders with deeper, wider and more transparent insights into their business.
So, what will the new model for trust look like? And what can our profession learn from other market participants who are exploring how to redesign organizations for this extension of trust? In my view, clear lessons can be gleaned from the growth of the sharing economy – spearheaded by the likes of Airbnb, Uber and TripAdvisor – based on a new form of trust that’s more peer-to-peer and less institutional. Put simply, people trust other people more than they trust organizations. Business needs to reflect this change, and our profession needs to help them do so.
Taking this lesson on board, the new model for trust will have various characteristics. It will provide insights into the issues on the minds of boards and management. It will look at the critical alignment between a business’s purpose, strategy and key performance indicators. And it will communicate transparently and credibly around the tone, culture and behavior of the business, its approaches to remuneration and risk, and how these elements link to overall business performance.
The new trust model will also take into account environmental impacts, and the broader aspects of sustainability in society and communities. It will apply sophisticated technology to analyze ‘big data’ from within and beyond the organization, and help make sense of it through insightful commentary. And it will provide information that’s as near real-time and as forward-looking as possible, while allowing different stakeholders to interrogate it from their own perspective. Together, all of this will enable organizations to demonstrate that they are fulfilling their stated values and purpose, and thereby that they deserve the trust of stakeholders.
This future brings many profound implications. For example, constant real-time scrutiny will mean the behavior of every organization and its people will always be under the spotlight, whether they’re dealing with an environmental issue or solving a problem for a customer – thus creating an ongoing series of key moments at which they can either earn or lose trust. And the heightened importance of technology in building and sustaining trust will demand new and different skillsets from the ones that companies often needed in the past.
The future: blending people and technology
Combine these attributes, and a picture of the future of the profession begins to emerge – one with human insight at its core. The rising power of technology has prompted some to ask whether the days of assurance delivered by human auditors are numbered. They aren’t.
To remain relevant for clients and resilient for all our stakeholders in the future that’s now taking shape, our profession needs to avoid regarding advancing technology as a threat that could effectively replace our role, and instead embrace a world where technology matters more than ever before. To keep pace with a changing world for our clients, we need to invest in changing ourselves. If there’s a lasting legacy I want to leave with PwC, it’s that I emboldened the PwC network towards that investment and change.
So, what kind of profession will all this create? Some things will remain recognizable from today’s world: the best professional services across assurance, tax and consulting will continue to be delivered by blending highly-skilled professionals with world-class enabling technology. But what will continue to change over time is the sophistication, reach and power of that technology, enabling our professionals to collect, manage, analyze and create actionable intelligence from an ever-wider array of information with increasing speed, flexibility and responsiveness.
This is a future that is exciting and different. As its various elements come together, it’s why I believe that today is the best time ever to join our profession. We’ll be at the nexus where technology, professional judgment and public trust converge and combine. And for any young person setting out on their professional career with the energy and ambition to make a positive difference to the world, as I did in 1974, I can’t think of a better place to start.
Dennis Nally leads the global network of PwC firms. He has extensive experience serving large multinational clients in a variety of industries, principally focusing on technology and life sciences. Dennis is also a frequent speaker and guest lecturer on issues affecting the professional services profession and the global capital markets. Read Dennis Nally's full biography.