Head of Strategic Planning & Corporate Affairs at INCEIF, Malaysia
In the past year, the landscape for Islamic finance has rapidly changed, thanks to the disruption brought in by FinTech. With the increasing usage of Shariah-compliant cryptocurrency[i], robo-advisory services, crowd-funding investments and peer-to-peer (P2P) lending platforms[ii], rising acceptance and use of artificial intelligence, machine learning and the Internet of Things(IoT), the Islamic finance industry is trying to catch up to its conventional peers.
However, with these rapid changes, the entire financial services sector is skeptical about trust and leadership. As a result, people prefer referrals and word-of-mouth recommendations. Thanks to social media businesses, all sectors, including Islamic finance, are taking a thorough look at their operating models and bringing a focus on generating social capital in order to ensure sustainability.
As trust becomes more critical in business relationships and technology disrupts business models across the financial services industry, Islamic finance has a pressing need to focus on demystifying itself and present value propositions that are easily understood. Similarities with responsible finance and alignment with sustainable development goals need to be explained in order to create conversation and engagement, through which trust is created. Undertaking such demystification would open up a larger market for the industry and enable it to position itself as a real value creator for the global economy.
Importance of Social Impact
In order to achieve such demystification successfully, we need to ask this question: ‘What is the social impact that Islamic finance organizations are achieving and how are we measuring it?’
One can answer this question by looking within an organization, or in other words, the process should start with employees. Today, employee engagement is a critical and strategic organizational requirement for any organization aiming to achieve sustainability because without sustainability there is no business continuity. The topic of employee engagement has spawned an industry by itself, resulting in different ways of how employee engagement can be done. It is needless to say that for each organization, the engagement needs are different and a one-size-fits-all approach simply does not work.
For an Islamic finance organization, a good starting point for employee engagement is business purpose. Ensuring that employees understand the organization’s business premise aids in the comprehension of its business strategy and initiatives. Such understanding then generates ideas, creates ownership of related initiatives and increases trust among employees, resulting in employee empowerment. Adding a touch of strategic human resource planning in the areas of functional and behavioral competencies would help an organization get a clear picture of how employee performance impacts organizational strategy and purpose. In addition, employees get a direct line-of-sight of individual performance and its impact on organizational results and on the society.
While comprehension of business purpose, strategy and ownership of initiatives is the first part of employee engagement, the second and more critical part is measurement of the success of social impact. One measurement parameter is the organizational performance achieved through employee performance. The second measurement parameter is the value of social capital generated through the impact of organizational activities. The value of social capital generated can be correlated with forecasting future profitability.
Measuring Social Capital through Brand Advocacy
Research shows that when an employee pitches for the organization as its brand advocate, it is the strongest form of recommendation that works. Whether it is the CEO presenting to the board or a front-line executive answering customer queries, the interaction creates an experience for the recipient—an experience based on which critical purchase decisions are made.
Effective brand advocacy is only possible when there is complete trust, ownership, and understanding of the business purpose, strategy, and objectives. It is not a media or content channel that is managed through corporate communication. On the contrary, it is authentic and trustworthy word-of-mouth recommendation.
It is difficult to build effective brand advocacy but not impossible. It has to be approached in a phased manner, as it is based on the level of emotional intelligence of the organization and its employees, and the work culture. In addition, organizations need time (a minimum of 14 months to upwards of three years) to build up effective brand advocacy and see results.
Engaging and Advocating on Social Media to Create Social Capital
Today, developing both employee engagement and brand advocacy involves effective use of individual social media channels by employees and the organization. Social media has become an extension of the community and has created a distinct shift in communication habits.
(Social media data courtesy: We Are Social)
With the world living on social media, it would be foolhardy to expect employees to not be on social media or not have conversations related to their work. While many organizations have strict communication policies with regards to social media usage at work, all that it does is it sends a message to the employees who speak about lack of trust. On the other hand, corporate social media accounts sending the standard corporate or product messages are seen as nothing more than advertising channels.
Active conversations are needed to ensure that social media aids in furthering organizations’ purpose, as that creates relationships and leads to business value both in terms of money and reputation. To get such conversations started, there needs to be regular and free-flowing interactions or conversations between actual people—employees and the stakeholders.
Brand advocacy enables employees to start such conversations, while an organizational social media account provides the necessary support content and adds to these conversations. What this dual conversation does is provide transparency and authenticity for the brand to communicate its story and gain acceptance. Over time, as employees and people engage in conversation, feedback and recommendations are made, and a genuine rapport emerges. This process helps build social capital or the preferred status for organizations’ product or service and ensures sustainability.
Given the speed of disruption in the financial sector, Islamic finance needs to take a thorough look at how it can create business value and work through connecting business strategy, employee engagement, brand advocacy and social media.
[i] Disrupting Islamic Finance from The Edge Malaysia, July 5, 2017
[ii] Robo-advisors ready to morph Malaysia’s Islamic finance industry from the Salaam Gateway, August 8, 2017