NewCo Shift Forum 2018
Startups with big missions are all the rage, but here’s what it takes to build mission into a 140-year old financial giant.
Lata N. Reddy is Senior Vice President of Diversity, Inclusion & Impact at Prudential Financial, and Chair and President of The Prudential Foundation. In this concise Shift Forum talk, Reddy outlines how a 140+ year old company has hewed to its original mission by incorporating “corporate social responsibility” directly into its business practices.
Lata Reddy: It’s great to be here. I’m going to talk about how it is that a legacy company makes the shift to this new vision of capitalism that we’ve been talking about. For us at Prudential, the new vision is really rooted in the past and in the belief that everybody should have the opportunity to be financially secure.
Our story began over 140 years ago when our founder John Dryden had a radical idea. He wanted to offer life insurance to working families. That went against the common business wisdom at that time because the prevailing belief was that working families could not afford to pay premiums, and worse, couldn’t be trusted to pay premiums.
Why would you engage in a market where you weren’t likely to make a profit? He saw in that market hard working families who are faced with desperate choices. When they lost a child or a partner or another loved one, they didn’t have the financial means to bury them. It’s a choice between a pauper’s grave, the indignity of that, or going broke.
He decided to change that. He created an insurance product that was affordable, specifically burial insurance, which he sold for as little as three cents a week. In that one act, he created an inclusive market that allowed working families to have the same opportunity to achieve financial security as everybody else.
In that sense, Prudential was a disrupter. Back in the day, they disrupted the insurance model as it existed then and did so in a way that unlocked both commercial benefits and societal benefits.
This quote here…is something that our founder said soon after the company was founded. “The justification of the Company’s existence is the advancement of the efforts of its policy holders and their families for better economic and social condition.”
Prudential was founded on that single idea. And you’ll all recognize this idea (referring to slides), it’s the original charter of business. A business should be in the business of more than just generating profits. It should drive progress.
Over the 140 years plus that we’ve been in existence, we’ve tried to adhere to that, adhere to that belief that everybody should have the opportunity to achieve financial security. While the why of it hasn’t changed, our purpose and our North Star, our mission has remained the same, but the what and the how have changed.
That’s because in this era where we’re seeing disruptions across industries and changes in labor markets and financial markets. We’re seeing risks being transferred from institutions to fragile household balance sheets. That requires companies like ours to go to market in very different ways. Ways that are more holistic, that account for the needs of a broader swath of the population.
What that also means is that things like corporate social responsibility are no longer things that can be done off to the side. It can’t be about how we spend the money we make. Fundamentally, it has to be about how we make our money.
What that also means is that things like corporate social responsibility are no longer things that can be done off to the side. It can’t be about how we spend the money we make. Fundamentally, it has to be about how we make our money.
To operationalize that at Prudential, we take an inside out and an outside in perspective. What that means is we take the expertise that we have within our company and our core capabilities across our business model and take that outside into the world to address major issues. Then, we bring outside expertise and perspectives into the four walls to help inform the decisions that we’re making. I wanted to give just a few examples of how we bring that to life.
The first is in our hometown city of Newark, New Jersey. Prudential was founded in Newark in 1875 and we have remained headquartered there ever since. We stayed through good times and through bad and when others left.
When we stayed, we made the affirmative decision to invest in both people and place. We do that in partnership with the whole set of actors across sectors.
One example is in work we’re doing to lead a coalition of our fellow anchor institutions, and we’ve expanded that definition of anchors beyond the classic Eds and Meds (educational and medical institutions) to include other institutions like corporations, who have proven commitment to the community and deep roots in the community.
We’ve gathered our colleagues to enact a three-pronged strategy. That is buy local, hire local, and live local. Buy local refers to us diverting some of our procurement dollars to businesses in Newark in procuring goods and services from them and pumping millions and millions, if not billions, of dollars into the local economy which will create jobs and all the attendant things that goes along with that.
The hire local is how do we prepare Newark residents for the jobs of today and the jobs of the future and how do we create pathways of opportunity to a large employers that are in town. Live local is a program to incent our own employees to live in the community and thereby invest their own resources in the community and, hopefully, create a bit of a flywheel.
Another example is an outside in perspective. That is a platform that we’ve created within Prudential that we call inclusive markets. That allows us to bring our partners from the outside world who are experts and have deep insights into consumer needs.
To allow them to engage with our business leaders to brainstorm. To think about opportunities to partner in ways that Prudential can expand its addressable market in ways that simultaneously creates societal benefits.
One example of an outcome of that work is work that our individual life insurance business is doing with Mission Asset Fund, which is a non-profit here in the Bay area. Mission Asset Fund works with immigrant communities and the Latino community to help build wealth in essence.
They do that through a number of initiatives. One is through lending circles. I’m sure you’re all familiar, small groups of people who come together to informally save and to borrow. Mission Asset Fund helps the members of these lending circles to build credit at the same time. They’re engaging with our insurance business to think about or to better understand the financial needs and the unmet financial needs of the participants of these lending circles.
Once we have that information, we can then identify opportunities to manufacture products or create services that meet those unmet needs. So, early days but potentially really interesting and promising results that could come from that.
The third example and my final example is both an inside out and outside in. That is a partnership that we created with Prudential’s real estate investment business called PGIM Real Estate and YouthBuild International which is a global NGO that works with opportunity youth.
If you’re not familiar with that term, opportunity youth are young people between the ages of 16 and 24 who are not formally employed and not in school. YouthBuild works with them to train them in a variety of trades, primarily the construction trades.
Prudential has been ramp funding YouthBuild for over 20 years and helped them open chapters in various parts of the world. We’re obviously pleased with results because we kept supporting them. We also recognize that there’s an opportunity to really boost the impact that they were having with their graduates and helping them to land a quality job.
We turn to our real estate investment business who have partnerships with the largest developers and contractors in the world. We’re a development based business in many countries. We’re actually building major assets. Therefore, we have this partnership network.
Our partners, who are values and line partners, I’m happy to say, raised their hands pretty quickly. We have been able to place 20 YouthBuild graduates in these construction sites with these partners. Admittedly, it’s a small number, but it’s early days.
Given the number of partners we have and the needs that they have, we think there’s some ability to take this to scale.
I wanted to show you a brief video that highlights this partnership.
Lata: It’s hard not to be inspired by these young people. We are so committed to the work that YouthBuild is doing. We know all of these takes time. It takes patience and it takes patient capital, but playing the long game is what we’re built for. We’re lucky in that regard.
Our company is in the business of making and keeping long dated promises. We do that all day long. These are promises that last over decades and even lifetimes. These promises are rooted in opportunity, the promise of opportunity, the promise that our customers can become financially secure and that the generations that come after them can prosper.
That’s the social compact that we are founded on and we try to adhere to it today. I suppose, most importantly, we understand that it’s only by adhering to that compact that we will be able to generate the long term value that we’re trying to strike, that we’re seeking for all of our stakeholders, and to enable us to be an ongoing, sustainable, and viable business.
Back to the future we go. Thank you.
[applause]