When companies see trouble on the horizon, often the best course is to act before the storm arrives. Two excellent examples of this strategy were on display in recent weeks.
First, drugstore chain CVS decided to stop selling tobacco products, saying they were inconsistent with its focus on healthcare. Next came retailer Gap Inc., which announced it would raise pay rates for its hourly workers above the federal minimum.
Observers seem divided into two camps – those who see these moves opportunistic PR ploys and those who applauded them as savvy business decisions. They are both. The best strategies have both strong business logic and a compelling message.
Both Gap and CVS had sound business reasons for these decisions, and they also wanted to get in front of regulatory issues that could have a major impact. For CVS, it’s bans on tobacco sales; for Gap, it’s the federal minimum wage.
Getting in front of an issue can be a wise strategy. The company benefits from making a change on its terms before being forced to do something by others, and it often reaps favorable media attention. The CEO gets plaudits for showing leadership, and customer and employee sentiment improves. Competitors face pressure to match the move, and if they do they’ll be seen as latecomers, not leaders. It’s a wonder more companies aren’t considering such steps.
Companies can also gain a spot on the platform in the national debate on big issues. Gap, for example, is now in front on the national debate over raising the federal minimum wage.
For Gap, the move to increase wages makes good business sense. Gap needs a high quality workforce, and having skilled workers gives Gap a good chance of introducing new services to set it apart from online rivals.
Other retailers may follow, but they won’t enjoy the favorable publicity that Gap received. Even President Obama lauded the company in a brief statement. It doesn’t’ get much better than that.
It’s notable that Gap took action on this issue after it faced strong criticism from labor groups over its failure to join an agreement to improve factory safety after a deadly fire at a garment manufacturer in Bangladesh. That criticism stung the company and almost certainly played a role in its decision to take a visible stance on wages.
These decisions are never as easy as they appear. A company has got to be willing to first consider a bold change and then make it a reality, overcoming critics along the way.
And taking a stand leaves other corporate decisions open to scrutiny. Salty snacks and sugary drinks aren’t exactly compatible with healthy living, but they still fill the aisles at CVS. Dropping tobacco was an easier step to take, and arguably had less financial impact than abandoning aisles of high margin snack foods. It’s also likely that retailers will face limits on tobacco sales long before limits on sales of food items.
For Gap and CVS, it’s hard to separate the PR benefits from the business benefits, and that’s the point. These decisions were wins on both fronts.