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FEE POSTS
Purpose Beyond Profit
by Bob Leonard and David Ross
Does your company have a purpose beyond profit? Organizations whose sole focus is on their own financial performance do not create the competitive differentiation or emotional engagement required for lasting success. An overemphasis on profit directs the organization inward, employees focus on short-term gains, there is little innovation, silos develop, and mediocrity prevails.
There is a strategic and commercial benefit from establishing and working towards a purpose beyond profit. Purpose articulates why an organization exists. It highlights the issues that an organization seeks to solve.
Leaders today grapple in fresh ways with an old question: how do we define, entrench and deploy meaningful purpose in the context of organizational turbulence? Purpose reflects the raison d’etre of an organization. Properly understood, it becomes the most important organizing principle within a company, informing and guiding strategic decisions.
Why Do We Need an Organizational Purpose?
Purpose provides a framework to guide an organization, its leaders and stakeholders concerning the difficult choices required to meet the challenges and opportunities of our increasingly VUCA* world. It is particularly valuable in this era of advanced stakeholder capitalism.
As we are seeing during this pandemic, without a core purpose beyond profit, we are tempted to tackle an array of unimportant issues that we perceive as urgent. That poses a problem with respect to performance, productivity and just what it is we are meant to be delivering. An organization needs a North Star in the form of a purpose.
The traditional management doctrine of “doing what we do today, just better” is no longer enough to deliver sustained success. Purpose as higher level planning engages the core precept of business innovation and provides a critical focus on why the organization exists. If developed and implemented correctly, purpose permeates culture. It can organically evolve a company culture.
Organizations that actively engage with their purpose take actions that make profits the outcome of purpose-informed and purpose-driven strategies. Long-term profits depend on the alignment of diverse activities. Purpose informs and directs strategic decisions.
Developing Purpose
It helps to start with a clear, shared definition of purpose. In a world where internal and external engagement is so vital to profit, performance and strategy delivery, the creation of a purpose can no long be the domain of a select few C-suite members. A purpose-driven company stands for and takes action on something bigger than its products and services. Purpose informs organizational strategy and can be a roadmap to remaining competitive in a VUCA world. According to PwC, 79 percent of business leaders believe that purpose is central to success. Despite this, less than half of employees know what their organization stands for and what makes it different.
A business purpose statement illustrates how your organization will impact its customers. Your company provides a product or service, so this statement should reflect how you will improve the lives of the people or businesses you serve.
Your company may have been founded with one purpose in mind and evolved to focus on something else entirely. For example, Twitter was first developed as an SMS-based communications tool to enable colleagues to keep tabs on each other. It morphed into something much different, and its current purpose is “To give everyone the power to create and share ideas and information, instantly, without barriers.”
Here are a few steps you can take to develop your purpose statement:
1) Define What Your Company Solves
Start by defining how your company solves a particular pain point for its customers. How does your product or service solve a problem for your customers?
For example, does it elevate social standing, streamline shipping and receiving, or strengthen online security?
2) List the Values Embedded in Your Purpose
What makes you passionate about the product or service your company provides? Brainstorm with your team to elicit some values that align with your purpose. Some examples are:
- Community
- Education
- Pleasure
- Sustainability
- Well-being
3) Combine the Rational with the Emotional
Purpose statements need to be grounded in reality, but also have an emotional element. In other words, the statement should have a “wow” factor which makes it compelling. Whole Foods does this well:
“Our deepest purpose as an organization is helping support the health, well-being, and healing of both people — customers, Team Members, and business organizations in general — and the planet.”
4) Make it Strong, Pragmatic and Tangible
Use plain language in your purpose statement so that it can be internalized within your company’s culture. Use just enough words to convey your message. Any more and it loses its meaning and inspiration. If it resonates, employees will grab hold of it and make it their own.
Climate as Purpose
Our climate crisis is the greatest challenge humankind has ever faced, and it threatens every living thing on Spaceship Earth. Successfully addressing it is a worthwhile purpose for all organizations. From a commercial perspective, there are also significant opportunities available from doing so.
Addressing our climate crisis requires mitigation and adaptation. Mitigation works to prevent the worst effects of our climate crisis. Adaptation works to manage the climate risks that an organization is facing, or will undoubtedly face in the near future.
Addressing our climate crisis is a purpose that all organizations can and should adopt. Cutting emissions in supply chains, manufacturing processes, packaging, product delivery, and in the use of a product are all efforts that will happen… either proactively or via government mandate. The earlier done, the less disruptive these efforts will be, and the more rewarded the organization will be. There’s no market differentiation in complying to mandates.
Companies that create products or services that drawdown CO2 will be hugely successful. The field is wide open now, and the scale of the effort needed is mind boggling. There is room for all types of competitors. Explore how your company might contribute to that effort. The critical issue is… who will pay? That’s where governments and the people at large come in. When a critical mass of citizens demands climate action, governments will underwrite research and development efforts.
An example of a major corporation with a purpose that addresses our climate crisis (while leveraging opportunities inherent in it) is consumer packaged goods giant, Unilever. Here is Unilever’s purpose statement as published in the EU’s Enacting Purpose Initiative Report, August 2020:
Unilever: “Our purpose is to make sustainable living commonplace.”
“Why? The answer is simple. We believe we have the opportunity – and the responsibility – to be a force for good in the world. And – just as importantly – we believe that doing good makes us a better business.
We’re convinced that the businesses that thrive in the future will be those that serve society today. That’s why ten years ago we launched the Unilever Sustainable Living Plan, which sets out how we are decoupling our growth from our environmental footprint, while increasing our positive social impact.
We’ve made a difference to millions of lives by acting on the issues that matter. Gender equality. Fairness. Climate action. Healthy eating. Hygiene. Sustainable sourcing. Plastic waste – and many more.
Acting in this way is helping us drive more profitable growth for our brands, save costs, mitigate risk and build trust among our stakeholders. It is the best and only way to achieve long-term growth.”
It’s likely not lost on you that Unilever is also leveraging their actions to tell their story… to proactively manage their climate reputation and differentiate the company in the marketplace.
Purpose as Motivation
People are looking for meaning at work. Organizations who frame that meaning around the impact they have on customers stand out. They engage customers and employees alike; they transcend their market. They become coveted brands and destination employers. Climate mitigation is the ultimate positive impact on customers.
Once it has been simply and clearly articulated, corporate purpose must drive what the organization does – its strategy and capital allocation decisions. Strategy is about choices that are made and choices that are consciously rejected after serious consideration. For a purpose to be authentic, it has to be the reference point for strategic decisions. Internally, leaders should ensure that purpose translates into what everyone in the organization does. Unless purpose statements translate into actions they are meaningless. Externally, leaders should ensure that the organization’s purpose connects with partner organizations throughout its supply chain and customer markets.
Ownership of purpose starts with executive leadership. It has to put in place appropriate structures, control systems and processes for enacting purpose. The purpose must be embraced by everyone in the organization from the board to the customer service reps. The purpose should also be endorsed by the organization’s external stakeholders.
A key role of leadership is to bring organizational purpose to life through communication and narrative strategies. As we discussed in a previous article on the power of storytelling, well-crafted stories build a sense of shared identity around a common purpose. That inspires those working in the organization to believe they are contributing as a team to something that is meaningful and fulfilling.
The narratives should be vivid and uplifting, and also authentic in conveying honestly and openly the challenges and failures as well as the successes. They should reveal a willingness of leadership to accept their share of the costs of failure as well as the rewards of success. A story about how a misstep was addressed and corrected resonates with people. It comforts them that mistakes happen, and they can be handled and learned from. It demonstrates transparency on the part of leadership… and generates trust.
In our next article, we will address climate as purpose (and opportunity) in detail.
*Volatile, Uncertain, Complex and Ambiguous
