Did you do that on purpose?
It wasn’t so long ago that any CEO worth his salt would declaim a singular focus on shareholder returns, write BGF’s Jon Rhodes. ‘The business of business is business’ ran the market mantra.
But, over the past few years a new narrative has emerged, and listening to the CEOs of some of the fastest growing and most impactful companies, large and small, you will hear more and more of them talk about the need for a company to have purpose; a North Star that acts as a guide for everything the organisation does.
A recent article in Harvard Business Review notes that, “Academics argue persuasively that an executive’s most important role is to be a steward of the organisation’s purpose. Business experts make the case that purpose is a key to exceptional performance, while psychologists describe it as the pathway to greater well-being. Doctors have even found that people with purpose in their lives are less prone to disease.”
Purpose is increasingly seen as the key to navigating complexity, volatility and ambiguity in a world where strategy is ever changing and few decisions are black and white.
Obviously any business must make money to survive or thrive and increasingly, must contribute in some way to the community it exists to serve, but this is merely operating as a viable entity. Proponents of purpose argue strongly that simply existing to make money will not unlock the power and potential of an organisation’s people, processes and productivity.
Numbers alone won’t help you recruit great people, retain them, inspire them or unlock their full potential “once hired”.
Numbers alone won’t help you stay ahead of your competitors by encouraging a culture of constant evaluation and innovation.
And numbers alone won’t help you to connect with your customers above and beyond the products and services they buy. Or build loyalty and create advocates.
However, this does not mean you need to be a non-profit cause to have purpose. Purpose isn’t a cause; it’s the guiding principle of your work and how to serve your audience. It’s about making the shift from seeing growth as a commercial agenda to growth as a visionary agenda.
Think of purpose as a verb, not a noun.
Distilling a corporate purpose is more than just rebadging your vision statement. The latter will talk about targets and aspirations and what you want the company to become “The first choice website for new car buyers”. Purpose is deeper, it is a clear articulation of the reason a company exists, the role it plays and the difference it makes in people’s lives. It should offer a clear and accurate description of why the core business exists.
When a company gets it right, it becomes obvious. Google defines its purpose as being “To organize the world’s information and make it universally accessible and useful” or Innocent Drinks “We’re here to make it easy for people to do themselves some good (whilst making it taste nice too)”.
Of course, the apparent simplicity of the statement can mask the effort that has been put into its creation. Major corporates often spend millions on these projects. A few years ago I was part of the team working with Pepsico to develop CEO Indra Nooyi’s ‘Performance with Purpose’ initiative. This initiative helped to create global programs across financial, sustainability and talent agendas and purpose still remains the keystone in Pepsico’s internal and external strategy, product development and corporate philosophy today.
Not everyone liked it at the time, not everybody bought into it, and there were some obvious critics on Wall Street who made the argument that Pepsico should be focusing their attention on the bottom line and hitting its quarterly numbers.
In the event, Pepsico’s financial results have held up very well and more than in part because of the diversification of their portfolio to include ‘healthier’ brands such as Tropicana and Quaker Oats. A direct result of these new ‘purpose driven’ initiatives.
Another group of sceptics did not believe a large established multi-national corporation, such as Pepsico, could really change its way of doing business from a focus on quarterly earnings to a ‘shared values’ approach.
I have some sympathy with this.
The truth of it is that bigger corporates have often allowed themselves to lose sight of their noble purpose, while the fast growing small and mid-sized companies – just like the ones that BGF invests in – find this approach natural. They have purpose as part of their DNA.
So how should smaller and mid-sized companies take advantage of this?
1. The first step is to get these inbuilt notions of purpose out of the head of the founders and onto the page. After all, who knows a company’s true purpose better than its founder?
2. The second is to codify the language, values, principles, processes and behaviours that will guide and differentiate the business through its growth. To take it off the page and into the hearts, minds and operations of the business.
3. And the third is to make the purpose ‘real’. To recognise and reward those employees that take responsibility for living up to, taking pride in, defending and promoting the purpose and delivering the ideas and actions that will enable the business to flourish.
It is the companies that hold true in some form to their original guiding purpose that create loyalty (and even love), command respect (and often higher prices) and offer value (beyond the numbers) that find their customers coming back to them again and again.