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Corporate purpose unlocks performance, resilience and competitive gains, as evidenced by a study of 28 high-performing companies that found ‘purpose’ was central to their ability to overcome declining growth and profitability.
Notwithstanding the success of companies embracing purpose, surveys show the gap between intent and action is large, which is why a process is much needed. A global survey by PwC found that only 28 per cent of employees felt fully connected to their company’s purpose, and a McKinsey survey of more than 1,000 participants found 82 per cent believed in the importance of purpose but only 42 per cent said that it had much effect.
Purpose is essentially the promise you make to your customers about solving their problems and improving their lives.
People want to know what you stand for. Your chosen purpose must be recognised, revered and practiced thoughtfully by your workforce. It becomes your guiding light when difficult decisions and trade-offs must be made.
It’s not to be confused with corporate ‘vision’, which is the aspirational view of the world you want to help create by delivering on your purpose; or the core ‘values’ that define the essential behaviours you want to see in your organisation. Corporate ‘mission’ statements add further confusion as they often cross over into the ‘purpose’ space - I’m not convinced they are needed, so, in this discussion, we’ll focus purely on ‘purpose’.
Leading companies are very clear on their purpose, they understand what they do and why they do it, unleashing the full potential and talents of their workforce; they use it to guide their strategy and fully embed it in their operations. Without it, you're likely to see:
Unilever was criticised for spending money pursuing its purpose of 'making sustainable living commonplace'. Following a failed takeover play for Unilever in 2017, Kraft Heinz subsequently 'blew up' and wrote down $15 billion of assets as it completely missed the trend to healthier foods and severely underinvested in R&D and sustainability.
Kraft Heinz is great at acquisitions, cost cutting and leveraging up balance sheets, but not so good at creating sustained earnings and shareholder value. In other words, purpose matters.
Any business that pursues its ends at the expense of the society in which it operates will find its success to be illusory and ultimately temporary.
- Michael Porter & Mark Kramer
Producing a great purpose statement isn't enough on its own, you need excellent strategic and operational skills, and a strong culture to realise the benefits. Business leaders must assess:
If the answer to any of these is ‘maybe’ or ‘no’, then there is work to be done.
US property group, Grosvenor Estate, defines its purpose as ‘deliver lasting commercial and social benefit, contributing to the economic, social and environmental wellbeing of the communities we are part of’. Their CEO says it has led to some specific investments that they might not have made without their purpose being so clearly articulated. More importantly, he also says there are some investments they have not made as a result of their purpose.
Mars Petcare, the global leader in the pet food industry defines its purpose as ‘a better world for pets’, which propelled its expansion into pet health, a major shift from products to services for a 75-year old company. It included the acquisition of veterinary services in North America and Europe. Such transformations aren’t without risk and commentators point to the clarity of their purpose as a significant factor in pulling it off.
Setting up a business for success requires its purpose to be well defined, embraced and embedded from the board all the way down to the frontline. Your people must be energised by it, customers must believe in it and your suppliers should want to come on this quest with you.
In my experience, it comes down to the 5-step process, for which more detail is contained in my Corporate Purpose Blueprint, and summarised as:
1) MINDSET
Compared to traditional business approaches, there is a significant mindset shift to be made in pursuing ‘purpose’. Organisations do not operate nor succeed in a vacuum, so the shift from an independent mindset to one of interdependence is critical, and it is futile proceeding without it.
2) REVIEW
How does your current purpose statement stack up? Does it represent a genuine societal need? Is it too broad or too specific? Is it elegant, concise and easy to communicate? Does it inspire your people to bring their best to work every day?
3) REVISE
When updating your purpose statement there are many sources of inspiration, such as how or why your organisation came into existence, what you are good at, prevailing societal trends and input from employees and business partners.
4) PLAN
Once you confirm your purpose statement, planning is required to put it into practice. For example, many purpose-led companies create pillars - usually three - to help break down the nature of the task. Senior and middle managers need to understand how purpose connects to their daily work, how it aligns with customers and how it affects external business partners.
5) IMPLEMENT
As the Chair of IAG, Elizabeth Bryan notes strong leadership is required to put purpose into practice. You will need to adjust some policies and processes, and add new dimensions to your monitoring, communications and reporting and so on.
Nothing of value ever comes easy!
It would be disingenuous to claim that putting purpose into practice is simple. It’s exciting, though, because very few organisations get it right; they may struggle to get the genuine buy-in they need, they might set off with good intentions but fall short on implementation; they may panic when shareholders are breathing down their neck.
I believe purpose unlocks an extraordinary amount of value on many fronts - and it will set you up as a 'good operator' in this volatile and unpredictable world.
To fund out more, download my Corporate Purpose Blueprint.
Phil Preston is a business purpose guide, helping executives and leaders with strategies for inspiring their people, delighting customers and delivering exceptional results. He is the author of Connecting Profit With Purpose and can be contacted via +61 408 259 633 or phil@philpreston.com.au
Marcus Gordon
