YOUNG LEADER LIGHTS THE PATH
Founder of Adore Beauty Kate Morris talks to Matrix about ‘customer centricity’ and building a profitable organisation on an ethical platform. By Lachlan Colquhoun.
At the height of the COVID-19 lockdowns of 2020, Kate Morris was presented with a dilemma. Adore Beauty, the company Morris founded and took to a $650 million sharemarket float, was also battling in the retail sector chaos, and had an opportunity to obtain more advantageous terms from its suppliers.
For many of Adore’s suppliers, the company was the only remaining outlet that was still open and operating. Given their dependence, Morris realised that “suddenly we had a lot more power”.
“One short term way for us to look at it was ‘Hey, this is a great opportunity to extend our payment terms and do things that can benefit our cash flow and bottom line,’” she says. “But what we actually chose to do was to bring forward their payment terms and pay them earlier because we knew they were really struggling to get enough cash through the door to keep their staff on.”
The long-term view
That decision illustrates Morris’s approach to business: look long-term in the belief that doing the right thing by suppliers and customers will always be the right decision, both ethically and for the business. “If you make short-term decisions that put profit above ethics, there is always a price to be paid along the line,” she says.
“If you make short-term decisions that put profit above ethics, there is always a price to be paid along the line.”
It’s an approach that comes from an ethical value set that Morris says forms the basis for the company. Morris founded Adore in her garage two decades ago because she didn’t think the beauty industry was being ethical in the way it was treating its female customers.
“There was a lot of restricting of information, a lot of marketing doublespeak, airbrushed advertising and a lot of barriers between the customer and good decision-making,” Morris says. “It was about making women buy things by making them feel bad about themselves.”
It was on those ethical foundations that Morris built a $650 million business, but she says it was a smart business decision built around ‘customer centricity’. “By taking a more customer-centric approach, which at its heart is more ethical because you consider your customers first and foremost, that has been the way we have created value over the years,” she says. “I don’t see ethics in conflict with building a good business and creating value, I see it as one of the core ways in which we do that.”
“I don’t see ethics in conflict with building a good business and creating value, I see it as one of the core ways in which we do that.”
A shared enterprise
Those values extend to Adore’s staff, who were all given shares in the company at the time of the sharemarket float. “The IPO was very stressful, but one of the most exciting and enjoyable parts of the process was being able to share the company with the team,” says Morris.
One of the attractions for Adore staff is the company’s ethical stance on issues such as gender and inclusiveness, and Morris says that – particularly when the company was small – she was amazed at the quality of the talent working in the company. She puts that down to people wanting to work in a company that aligns with their values.
Values came to the fore when the company recruited a new chief executive last year. “The most important thing about that hire was that we got someone who had amazing skills and experience, but who was first and foremost a good fit with our values,” says Morris.
“We use our values as key decision-making tools every day. If we have a difficult choice to make and there are two options, we always go back to our values and ask what they say.
"We make the decision based on our values even if that makes things more difficult or more painful.”
Listening to customers
Morris grew up in a Uniting Church environment and while she says she is “not particularly religious” today, she believes religion gave her a moral compass based on principles of equality, mutual respect and inclusion that have guided her life and her career in business.
She welcomes the moral activism of young people today and says that while they may be less engaged in the “traditional political sense”, they are giving their ethical positions power by the “brands they choose to engage with”.
“I think younger people have very much engaged with their power as consumers to create the kind of world they want to see,” says Morris. “And I rightly think they have little tolerance for companies that do the wrong thing, and they are very much expecting conversations to be had with companies where they spend their money and that is a good thing.”
“Younger people have very much engaged with their power as consumers to create the kind of world they want to see.”
Morris says Adore is happy to respond to the ethical expectations of its customers and, in many cases, it is customer feedback that can drive the company to change.
“Standards are changing rapidly and we have to be engaging with customers and listening to them, and if they tell us there’s a thing we are doing that they don’t like, we would be bad at our job not to listen,” she says.
This activism also extends to the company itself. Corporates, says Morris, “absolutely” have the right – and responsibility – to speak out on issues. “Consumers are looking for leadership and they don’t care where it comes from and if political parties are not giving them the results they will look to corporates – and I can’t blame them,” she says.
“We make our position very clear every day, but I also think that companies need to pick and choose which conversations they get involved with publicly, and which are their ‘brand fights’ – and these are typically the issues which are of most important to their customers.” Asked if there are any ethical issues that keep her up at night, Morris says her concern is to stay vigilant and keep working to improve, “because there is so much more to be done”.
“On some levels Adore is so far ahead,” she says. “We are one of six ASX companies with a majority of women on the board, we have a majority of women on our leadership team, but then there are so many aspects to it all.
“There is racial, age, and gender diversity and every single one of those conversations is difficult, because what we are asking ourselves to do is to unpick the way the world works now and to do that we have to deliberately swim against the current to make progress.”
JOHN NEIL Director of Innovation The Ethics Centre
In an increasingly interconnected stakeholder economy, companies face the challenge of achieving not only what’s good for the business, but also what’s good for customers, shareholders, suppliers, communities and the world in which they operate.
“Doing what’s good” may sound jarring to the ears of business leaders. Some may respond by saying, “Surely the purpose of a business is to make a profit.” Profit is a byproduct of delivering value aligned to purpose. How value is generated is now just as critical to profit in evaluating a business’s success.
In a stakeholder economy, the so-called ‘intangible’ forms of capital – trust, knowledge, reputation, strong networks and innovation – are increasingly critical to success. These forms of value have ethical foundations – they are forms of ethical capital.
Where these foundations are weak, value is destroyed. From Volkswagen’s emissions saga and AMP charging dead customers through to Rio Tinto destroying a 46,000-year-old sacred site, all have illustrated the damage that results from a lack of focus on ethical capital.
Without clear connections between why they exist (purpose), what they value and the means by which value is generated (principles), a business will draw down on its ethical capital.
Ethical capital not only prevents and mitigates against the loss of value caused by misalignment, it also provides the foundation for building sustainable, long-term and higher returns for shareholders, other stakeholders and society as a whole.