THE WHAT, THE WHY AND THE HOW OF PURPOSE - A guide for leaders - CMI
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
THE WHAT, THE WHY
AND THE HOW OF
PURPOSE.
A guide for leaders.
July 2018
In association with
ACKNOWLEDGEMENTS This paper has been written by Charlie Ebert of Judge Business School Cambridge, Dr Victoria Hurth of the University of Plymouth, and Prof Jaideep Prabhu of Judge Business School Cambridge, and the views expressed are the authors own. It has been edited by Patrick Woodman, Head of Research and Advocacy at CMI. Thanks to A Blueprint for Better Business making introductions to the interviewees. CMI, A Blueprint for Better Business and the authors would like to thank everyone who took part in interviews for sharing stimulating, thoughtful and candid insights about their experiences in creating purpose in business. 2
CONTENTS
Foreword 6
About this white paper 7
1. WHAT is purpose in business?
Five insights from leading employers 8
2. WHAT makes purpose different?
Purpose compared to CSR, Sustainability, Mission and Vision 12
3. WHY:
Five reasons companies are becoming purpose-driven 15
4. HOW:
Three considerations for adopting and implementing
an organisational purpose 18
Conclusions and continuing the journey 22
Five principles of a purpose driven business 23
References 24
3
ORGANISATIONAL PURPOSE:
WHAT, WHY AND HOW...
Purpose is bringing a
sense of meaning to the
organisation. It’s around
creating meaning, and
What
is organisational purpose?
answering the question,
An organisation’s meaningful and
“why do you do what enduring reason to exist that aligns
you do?” with long-term financial performance,
provides a clear context for daily
Geoff McDonald, Former decision making and unifies and
Global Vice President of Human motivates relevant stakeholders.
Resources, Unilever
What makes organisational purpose different?
CSR
By comparison, CSR
Purpose can be seen as a way
Purpose is a core and vs to compensate for
enduring motivation in problems with their
the company core business activities
to cynically uphold a
respectable image
Purpose Sustainability
Purpose focuses on Sustainability focuses
the ultimate means on the truism that
provided by the vs ultimately everything
emotional capital relies on natural capital
to serve others and to achieve
achieve long-term long-term wellbeing
wellbeing
Purpose Vision
The fundamental What a company is
motivation for the trying to achieve
company which vs vs
inspires the vision and
guides the mission Mission
and resulting How a company
strategy goes about it
4
Why How
Three considerations for
Five reasons companies are
adopting and implementing
becoming purpose-driven.
an organisational purpose.
To maintain and increase Choosing the Embedding the Identifying
legitimacy in business purpose and its purpose deeply important
framing organisational
To attract, motivate and Stories and actors
retain talent Engage proof points
stakeholders Show the financial/ Senior leadership
To drive strong customer To enrich your business benefits Signal advocacy,
and stakeholder relationships perspective regarding and the meaningful, credibility and gives
how you impact emotionally compelling tacit permission to
To increase employee society and your results of change employees to act
psychological wellbeing core identity
Incentivise Middle management
To increase business Origins - purposeful The gateway between
performance “Organisational outcomes the senior leadership
nostalgia” To help more people ambitions and the rest
To connect employees to learn what the right of the organisation
to the “good old days” thing to do is on a including purposeful
and restore a sense of daily basis younger executives
direction
Go public
Provides a motivational
boost and a level of
external accountability
The bottom line is that purpose-driven,
people centric, values-driven companies True transparency
Enables trust and
outperform. Not just because they do builds the licence to
better sustainably over time, but because operate
they avoid the risk.
Ann Francke, CEO, CMI
5
FOREWORD
The idea that organisational purpose This report aims to help leaders and
is key to creating better businesses managers cut through the noise.
and repairing the fractured relationship It provides a helpful perspective
between business and society has through 14 new in-depth interviews
grown dramatically in recent years. among business pioneers in the
It has moved decisively towards the field, combined with insights from
Ann Francke CCMI CMgr
management mainstream, with financial the research literature. It gives senior
CEO, CMI
powerhouses like BlackRock joining leaders, and indeed managers at all
calls for companies to adopt purpose, levels, a helping hand in thinking about
to shape stronger cultures and deliver what purpose is and what it might
sustainable success. mean for their organisation.
A seemingly endless flow of business We hope this research and the author’s
crises has shown the harm that can be conclusions give confidence that, while
done by a myopic focus on maximising not always easy, exploring purpose
shareholder value.1 What we face is seriously is essential to reshaping
an ecosystem problem – and solving the business ecosystem and building
it means asking deep questions about successful, sustainable businesses for
some of the underlying assumptions the 21st century.
which shape how businesses behave -
including assumptions about the place
of profit and how people are motivated.
Charles Wookey
The previous ‘big idea’ that attempted
CEO, A Blueprint for
to improve how business interacts with
Better Business
the world around it, corporate social
responsibility, looks ever more weak
and outdated.
No wonder that people are talking
about the potential of purpose in
business. However, the risk is that it
too becomes just another ‘big idea’
which turns out to be a passing fashion
not a fundamental shift. Exploring the
real challenge of becoming purpose
led is not easy and what can help
most is practical stories of those at
the forefront of the purpose movement
– and for managers who haven’t
yet encountered it, there are lots of
questions to be answered about what
purpose means and how it works in
practice.
1
Bower, J.L and Paine, L.S., “The Error at the Heart of Corporate Leadership”, Harvard Business Review, 2017. Available at: https://hbr.org/2017/05/managing-for-the-long-term
6
ABOUT THIS WHITE PAPER
The growing popularity of The focus of the interviews was not Interview List2
organisational purpose is mirrored on how authentic the companies’
by increasing confusion as to what purpose-driven activities are, the BAM Nuttal – John Hutton
the concept actually means. extent to which the company has been (Head of Sustainability)
successful in embedding a purpose
Brunswick Consulting –
To help managers cut through the throughout the organisation, or the
Meaghan Ramsey (Partner)
noise, a team from the University success of the company in being
of Cambridge and the University of purpose-driven in the eyes of the BT – Richard Spencer
Plymouth embarked on a now two-year public. Instead, we looked at what (Strategy Director)
long project to capture the essence purpose means at the organisation Chartered Management Institute –
of the concept and identify what ties level, why companies are pursuing Ann Francke (CEO)
the different members of the purpose it, and how it might be effectively
movement together. pursued. Contexis – John Rosling (Owner)
EasyJet – Paul Moore
The primary focus of the research After the individual interviews, we (Communications and Public Affairs
has been 14 in-depth interviews with brought our participants together Director)
leading professionals in the purpose for a roundtable discussion at CMI,
movement. Our interviewees were gaining further insight and generating Flood Re – Brendan McCafferty
senior executives, typically at CEO, debate where viewpoints converged (CEO)
Partner, VP, or Director level, in and differed. Despite the variety of Unilever – Geoff McDonald (Formerly
companies across eight industries. backgrounds, a clear underlying Unilever’s Global Vice President of HR)
These were mostly large, for-profit concept of organisational purpose
international corporations with annual emerged. Interserve – Tim Haywood
revenues of over £10 billion, plus (Group Finance Director)
some consultancies and support The insights presented here will be Marks & Spencer – Mike Barry
institutions. Some interviewees worked useful for multiple readers, including (Director of Sustainable Business)
for companies that were only a few directors or senior leaders who
years old, while other organisations want to demystify what purpose is, Pearson – Amar Kumar
were forty years old or more. Some or who sense their current purpose (Senior Vice President, Office of the
were regional, others global with is non-existent, poorly defined, not Chief Education Advisor)
over 100,000 staff. The one unifying motivating or unsustainable. It will PwC – Neil Sherlock
characteristic was that each company be helpful too for middle managers (Head of Reputational Strategy)
was deemed by its fellow peers as in purpose-oriented organisations,
being invested in the organisational who are confused as to why they are PwC3 – Alison Sharpe
purpose movement. being asked to consider meaning and (Director, Corporate Affairs)
purpose in the way the organisation is Vodafone – Matt Peacock
run. It will also help future leaders who (Group Director Corporate Affairs)
are just starting out in their career and,
are keen to work for businesses that Walgreen Boots Alliance –
serve a greater good. Richard Ellis (Group Head of CSR)
2
nly interviewees for whom consent was requested and approved are listed. Some positions and titles may
O
have changed since interviewing or may be different from when interviewed.
3
Now a consultant on organisational trust and purpose
71. WHAT IS PURPOSE IN BUSINESS?
FIVE INSIGHTS FROM LEADING EMPLOYERS
This is a really important What is organisational However, the growing popularity of
organisational purpose is rivalled by
purpose?
emerging trend that no increasing confusion about what the
one can quite nail to the At the beginning of the decade, concept actually means. A review of
the writing on it reveals conflicting
‘organisational purpose’ was little
wall, and we do need more than the calling card of a small and partial descriptions that variously
some smart minds to set of pioneers.1,2 Now, organisational describe purpose as a recruitment
tool,12 a way for a company to
purpose is used to rank companies,3,4
gather many different offered as a speciality in consultancies differentiate itself,19 a way to deal
thoughts and input and change agencies,5–8 and promoted with uncertainty or risk,20 and an
altruistic way for companies to help
in a wide range of professional writing
into one compelling and analysis.9–14 A strong sense of society.13 For marketing professionals,
narrative that we can organisational purpose within teams purpose is proposed as a way to
help customers connect more deeply
has also shown better growth rates
then operationalise. and higher employee engagement with a brand, leading to the parallel
The timing is right. I levels – three times higher than their development of “brand purpose”.21–23
This range of interpretations also exists
non-purpose-driven rivals.15
think you are hearing in academia.24-25 As there is confusion
a sufficient number of It has undeniably hit the business around the definition of purpose, it
is obvious that there would also be
mainstream: this year’s annual letter to
voices saying ‘help.’ chief executives from BlackRock’s CEO confusion around what purpose means
was entitled ‘A Sense of Purpose’.16 in practice. Whilst 66% of organisations
Mike Barry, Director of Sustainable If the trend continues, the Centre for are setting out their purpose, only 26%
Business, M&S Social Justice in 2016 estimated that discuss a link between purpose and
all UK businesses will have social strategy, contradicting others who
purposes by 2026.17 Something believe that purpose is a key strategic
supported by the advisory panel to the benefit.26 It is not surprising that our
UK Government’s Mission-led business conversations with business leaders
review.18 indicated a demand for more clarity.
8Defining organisational 1. A transcendent, 2. An enduring attribute of
purpose meaningful reason to exist the organisational identity
To develop a rigorous definition of (Purpose is about) saying, ‘why are It’s the essence of who you are.
purpose, we searched for common we here as a business?’ It sits above. Purpose is the fundamental essence
aspects underlying the interviews, It’s a higher reason.” Director of an of an organisation. Alison Sharpe,
professional reports, and academic international technology company independent consultant on
literature. Despite a diverse range organisational trust and purpose,
of interpretations, a clear definition Purpose is bringing a sense of meaning formerly Director, Corporate Affairs,
emerged. Organisational purpose is: to the organisation. It’s about creating PwC
meaning, and answering the question,
An organisation’s meaningful ‘why do you do what you do?’ An organisation’s identity is central,
and enduring reason to exist that Geoff McDonald, Former Global enduring, and distinctive.28, 29, 30, 31 In our
aligns with long-term financial Vice President of Human Resources, interviews and research, organisational
performance, provides a clear Unilever purpose is linked to all of these.
context for daily decision making,
and unifies and motivates relevant Executive interviews and professional The core about purpose is it doesn’t
stakeholders. reports unanimously suggest that change. So, the purpose stays
organisational purpose should provide regardless of the times, regardless
We believe that the above definition the company with a meaningful and of the leaders, regardless of the
captures all aspects of organisational higher, or company-transcendent, organisation, regardless of the
purpose that make it such a powerful reason to exist. We do not mean challenges of society. Purpose
tool in business today. From a review transcendent in the religious sense, is at the core of the organisation.
of the literature we also believe that this but more simply, something which is Neil Sherlock, Head of Reputational
applies to all organisational forms, from greater in scope than the subject. As Strategy, PwC
charities and co-operatives to B-corps. such, organisational purpose is external
Purpose is motivational and directional, to the organisation. The strong underlying message is
tapping into our strong human desires that purpose is at the very foundation
to serve the wellbeing of others, while Sometimes, business purpose has of the company, in its very DNA. If
also giving clarity of direction – a north been used to describe somewhat not, it is ‘purpose-washing’. (We pick
star. It is not only unifying across abstract notions, such as transforming this theme up in the third and fourth
organisations and individuals but the status quo (e.g. Steve Job’s chapters.)
also powerfully differentiating for an ‘putting a dent in the universe’) or doing
organisation in a marketplace. Finally, something that seems intrinsically
it is at the core of the organisation, valuable (e.g. an art company pursuing 3. Aligned with long-term
helping the business pursue long- beauty for beauty’s sake). However, financial performance
term value creation by clarifying its our interviewees emphasised that it
foundational identity. It also holds is about a company serving a larger, The sweet spot is when you look
not only for for-profit enterprises but societally valuable pursuit, either at your own business, what is it
other organisation types too, such as directly or via a sustainable system of in our core business that delivers
charities and social enterprises, since resource use. As one interviewee said, returns to our shareholders that
they too need to be financially sound to “It’s about making a contribution to also has a positive societal benefit?
survive in the long-term. society and the environment.” Matt Peacock, Group Director of
Corporate Affairs, Vodafone
We will now unpick our definition, It is this service of others that makes
taking a look at each of the five aspects the concept meaningful and therefore Perhaps the most common
that an organisational purpose should highly motivating on a human level. misconception of purpose is that,
have. Purpose gives us meaning because it because it is about prioritising societal
taps into universal values about what benefit, its pursuit automatically
is good and our fundamental drive as requires an organisation to sacrifice its
human beings to serve the wellbeing of profits. In reality, purpose is believed to
others.27 Therefore, an organisational be aligned with, and indeed beneficial
purpose that is authentically for, long-term financial performance.
implemented should be a motivating
force for individuals within the company
and for its stakeholders.
9When pressed to describe the Because purpose creates an This has significant implications for
relationship, leaders’ responses had enduring sense of what is driving the company agility and may be one of
some different emphases, but the organisation, it helps employees to the concept’s most important strategic
dominant view was that purpose and make decisions more quickly than benefits, helping companies navigate
profitability go hand in hand. before.32 A purpose may be very the Volatile, Uncertain, Chaotic,
high-level, there are many decisions Ambiguous (VUCA) world we live in.
I had an “A-ha!” moment which was for companies to make around how
that you can use this concept of much detail should be emphasised There is a link between purpose and
purpose to truly drive the performance or dictated for employees and autonomy because if you know where
of the organisation, and I saw how stakeholders, and how much should be you are going, it’s much easier to be
powerful a company could be allowed to emerge. An organisational able to be autonomous. I think purpose
in contributing to the social and purpose needs to be specific enough creates some real clarity and therefore
environmental challenges or issues that to give direction to all stakeholders, but some real agility. John Rosling, CEO,
our world faces. Geoff McDonald, also broad enough to give individuals Contexis
Former Global Vice President of the flexibility to determine the best
Human Resources, Unilever course of action in their specific situation.
5. Unifying and motivating for
I think it’s really, really important that What we hope is that having a high- stakeholders
without profit the achievements of level purpose statement allows people
purpose are often completely flawed. in different parts of the company to say, … it (the purpose) really galvanised and
Brendan McCafferty, CEO, Flood Re “What does this mean for me?” rather centred where the business was going,
than for us to tell them what they need not just for the owner but for everybody.
We can only create the social impact if to do. Director of an international John Rosling, CEO, Contexis
it does make profit. Laura Turkington, technology company
Senior Manager of Global Innovation Organisational purpose helps address
and Business Development, Vodafone These two characteristics – high-level the challenge of balancing diverse
direction and individual freedom of stakeholder needs, by providing a
interpretation – give organisational clear sense of meaning, which all
4. A clear context for daily purpose the sense of being like a stakeholders can support or at least
decision making doctrine. Doctrines, or sets of beliefs, understand. In this way, it helps raise
are common within law, religion, and the sights of stakeholders (including
It needs to become the go-to test that military practice, and are particularly competitors) beyond their individual
people have in their minds when they useful for organisations and groups demands to a higher, motivating,
do what they do during every day, that span multiple countries and shared goal. Vodafone, for example,
and they hear what they hear every diverse contexts.33 Purpose creates is well known for teaming up with its
day, and see what they see every day. both a broad direction and the creative competitors to tackle larger societal
Brendan McCafferty, CEO, Flood Re freedom to appropriately address problems.34 Unilever, as a global
challenges. FMCG company, has worked closely
with the Department for International
Development (DFID) to address
development challenges.
10However, it would be wrong to assert Definitions are important
that all organisational purposes align all
of a company’s stakeholders. Rather, My biggest fear in this space right now
many purpose-driven organisations is purpose washing. I’m just seeing it
have made decisions that upset certain all over the place. Geoff McDonald,
stakeholders, using their purpose to Former Global Vice President of
justify and stick to difficult decisions. Human Resources, Unilever
We’re not going to be pushed around As the benefits of organisational
by anybody. We’re going to do the purpose attract more companies,
things we need to do so that we are many of the movement’s first-movers
clearly in alignment with our purpose… fear an influx of ‘purpose washing’.35
So, it caused us to do things that This is a particularly important threat
were actually quite tough. Brendan for purpose because many of its
McCafferty, CEO, Flood Re potential benefits rely on stakeholders
believing the company is authentic
Similarly, Unilever, adhering to its about its purpose. By defining what
purpose, ended quarterly reporting to organisational purpose is, we hope
the City and actively managed away to help professionals and researchers
its hedge fund investors.2 Barclays identify inauthenticity, helping to keep
used its purpose to justify ending its the movement impactful and relevant.
tax reduction department,1 which may
have upset some stakeholders. And
one of our interviewees recalled his
company declining a major contract
because the client did not align with
their purpose.
Even if a company’s purpose is a
universally agreed goal, how the
company goes about achieving that
purpose may be contested. Therefore,
the power of purpose to align and
motivate stakeholders will depend on
the perceived relevance of the purpose,
and the perceived appropriateness of
the method used to pursue the purpose.
112. WHAT MAKES PURPOSE DIFFERENT?
Much of the confusion around purpose CSR is, “tick this box over here.” It has Moreover, organisational purpose
lies in how it relates to other business nothing whatsoever to do with the core is usually about pursuing a brighter
concepts. What is the relationship of business. Ann Francke, CEO, CMI tomorrow rather than just avoiding a
between organisational purpose and darker one – a maximising rather than
CSR? Is it the same as sustainability? Even when CSR is about genuinely minimising position. As Elon Musk
How similar is purpose to mission, trying to help society, it is often low explains when discussing his passion
vision, and values? on the company priority list and for Space X, “Life cannot just be about
typically the first item on the budgetary solving one miserable problem after
For some, this concern with the chopping block when managers look another, that can’t be the only thing…
‘alphabet soup’ of business concepts for savings. By contrast, purpose is There needs to be things that inspire
is not important. However, we argue – perceived as a core and enduring you, that make you glad to wake up in
as do the leaders we interviewed – that motivation in the company. the morning and be part of humanity”.3
purpose is, in fact, unique, and that Our interviews supported this view
understanding why it’s unique matters. If you think about corporate social that purpose moves the agenda to a
In practical terms, understanding what responsibility, it kind of feels very positive one.
it means is vital for any leader trying to bolted on to an organisation, and it’s
create purpose in their organisation. often one of the first things that get hit I think what we have learned is that you
More widely, it also prevents ‘purpose- by budget cuts. It’s often one of the get the organisation more excited in
washing’ from companies who might things that most people dismiss as not a positive way rather than a negative
think they can take short-cuts with core to their business strategy. But if way... For instance, if my goals were to
purpose.1 you have a purpose, then that is your have fewer bugs in our (product). Yeah,
core. Meaghan Ramsey, Partner, that’s good for our end users. That’s
Brunswick very good. But wouldn’t I rather phrase
it as I want end users to be able to
1. Purpose and CSR In the academic world, CSR has many access positive outcomes? To succeed
variations, and some seek to place in that positive outcome and make
Well, the first thing that it isn’t is CSR.
people and planetary issues at the progress? That’s much more positive.
Matt Peacock, Group Director of
heart of business.2 However, this is Amar Kumar, Senior Vice President,
Corporate Affairs, Vodafone
very different from placing one clear Pearson
purpose into the very core of the
Unanimously and adamantly, business company’s identity. As Matt Peacock,
professionals separate purpose from Group Director of Corporate Affairs
the concept of Corporate Social at Vodafone put it; a purpose-driven
Responsibility (CSR). We found that company is one that “aligns its core
CSR is considered to be a superfluous, business strategy with its ability to have
ancillary activity. At its worst, it was the maximum social impact in specific
seen as being a way for companies to targeted areas.”
compensate for problems with their
core business to cynically uphold a
respectable image.
12It was also recognised that this shift to creating a sustainable society. So, purpose and sustainability are
needed to be made wholeheartedly, Mike Barry, Director of Sustainable closely related. Both expand people’s
in order to not be caught between a Business, M&S view from the narrow, short-term to the
minimising and maximising position: long-term systems level. Additionally,
In sustainability, the three pillars of purpose shares sustainability’s focus on
CSR is about managing the status quo, financial, environmental, and social the ‘ultimate end’ of societal wellbeing,
so CSR is not purposeful, it’s just risk concerns are the language used to drawing attention to the ‘ultimate
management. … So, either in a very unpick how to achieve long-term means’ that are needed to deliver this
binary world you have low cost and wellbeing.4 This language was also wellbeing.5
you manage your backside, or you’re present in some of our interviews on
absolutely purpose driven with huge purpose. However, there are some key
levels of engagement passion and differences. While sustainability focuses
emotion about what you do. What you There’s money everywhere. What’s on the truism that ultimately everything
don’t get is caught in the middle with not around is social and environmental relies on natural capital to achieve the
the costs but none of the benefits. capital… we’ve generated more and wellbeing, purpose focuses instead
Mike Barry, Director of Sustainable more financial capital at the expense on the ultimate means provided by
Business, M&S of social, environmental and human the human motivation to serve others
capital. Geoff McDonald, Former and connect to that which is greater
Global Vice President of Human than oneself. Purpose is also more
2. Purpose and sustainability Resources, Unilever specific in its contribution to wellbeing,
often narrowing in on a specific goal
Many participants noted strong overlap And this sustainability agenda was or service group that draws on its
between sustainability and purpose, seen by some as the platform through unique capacities and identity. Figure 1
with many seeing purpose as a key which they can live out their purpose: illustrates the overlap and differences.
way to pursue a sustainable society:
If you use the word sustainability in its
The endpoints we want are a broadest sense, of helping to address
sustainable society first, and economy social and environmental issues in the
second. And (this company’s) world, you can use that as the vehicle
participation in society is furthering to live your purpose. Geoff McDonald,
that endpoint. So, I would define my Former Global Vice President of
purpose as contributing meaningfully Human Resources, Unilever
Figure 1: The relationship between purpose and sustainability. Adapted from Donnella Meadow’ adaptation of Daly’s Triangle5
ULTIMATE ENDS Wellbeing
Happiness, harmony,
identity, fulfillment,
‘Ends’ focus of self-respect, self realization
community, trancendence
Purpose and Theology & ethics enlightenment
Sustainability
INTERMEDIATE ENDS Human capital & social capital
Health, wealth,
leisure, mobility,
knowledge,
communication,
Political economy consumer goods
Organisational
status quo
INTERMEDIATE MEANS Built capital & human capital
Labor, tools, factories,
processed raw materials
Science & technology
Emotional
‘Means’ focus Capital
ULTIMATE MEANS Natural capital
of sustainability Humans
Solar energy, the biosphere,
earth materials, the motivation
biochemical cycles
to serve
‘Means’ focus wellbeing
of purpose of others
13Mission, vision, and purpose Organisational purpose is meaningful because how can you have a successful
because it connects with human organisation if you don’t. While
So your purpose is your why. Your values. It achieves its full potential organisational purpose shares the
vision is what the world looks like when to align and motivate stakeholders recognition of an organisation as part of
you’ve made it. And the mission is by pursuing company-transcendent a complex system that must recognize
how you are going to get from where purposes that are grounded in universal and serve its constituent parts to flourish
you are today to the vision. Meaghan human values.8 It means that values are in the long-term, it also recognizes that
Ramsey, Partner, Brunswick a way of reinforcing and crystallising such a system needs a clear sense of
the meaningfulness of the purpose direction and distinctiveness to unite
If the definitions of sustainability and and the way in which the purpose is and energize resources. Hence purpose
CSR are in muddy water, then the pursued.9 is about focusing on serving the
concepts of mission and vision are wellbeing of a clearly articulated group
submerged in a mudslide. These Passing the mafia test and serving a range of stakeholders in
concepts span longer time periods in order to achieve this. That said, the idea
business than CSR and sustainability, It is worth referencing the common that stakeholder theory is about trying
and their meanings change in different dictionary definition of purpose to to serve all stakeholders is a misnomer.
times and contexts.6, 7 However, in make plain why the modern concept Freeman and colleagues11 made clear
our interviews, many saw the vision of ‘organisational purpose’ is much that the first of the two stakeholder
as what the company is trying to richer than the simple, “why you do theory foundations involve articulating
achieve, the mission as how it is something or why something exists”.10 a purpose through a clear sense of
going about it, and purpose as why This stripped-down view does not the shared value stakeholders want to
it has that vision and mission in the imply any judgement on what the create. Our research goes further to
first place. Put another way; purpose purpose might be. It does not pass suggest that organisational purpose
is the fundamental motivation for the the ‘mafia test’. The mafia may have places the long-term wellbeing as the
company which inspires the vision a purpose or set of objectives but the shared umbrella goal and it requires a
and guides the mission and resulting difference to the modern business company to be clear about its unique
strategy. concept lies in organisational purpose identity and its reason for existence
being company-transcendent, within this meaningful global frame:
Values and purpose meaningfully based on universal human whose wellbeing is the organisation
values, and leading to ultimate ends serving that aren’t already served very
Whatever the values might be, that’s of wellbeing. The dictionary definition well by someone else? – i.e. based on
what starts to land it for people. You lacks these or the other characteristics what unique internal capacities and
can then start translating those values identified both in our interviews and in market advantages. An organisation’s
into behaviours. Then incentivising the burgeoning literature. purpose is then pursued in ways that
those behaviours. That’s all part of are profitable, do not conflict with
landing the purpose. Alison Sharpe, Stakeholder orientation and the meta-frame (i.e. reducing long-
independent consultant on purpose term wellbeing for other groups) and
organisational trust and purpose, importantly serve the stakeholders it
formerly Director, Corporate Affairs, Stakeholder theory is often understood depends on, thus reinforcing the ability
at PwC as being about serving all stakeholders, to meet the purpose.
143. WHY: FIVE REASONS COMPANIES ARE BECOMING
PURPOSE-DRIVEN.
Why do companies exist? the Stanford Financial Fallout, Tyco of corporate scandals and losing
Ltd., Enron Corp., Parmalat, Adelphia trust. Tim Haywood, Group Finance
The view that an organisation’s main Communications Corp., the Deutsche Director and Head of Sustainability,
purpose is to maximise financial Bank spying scandal, or the Carillion Interserve
returns1, 2 is so prevalent it has collapse, just to name a few) have
even occasionally been written eroded public trust in business. This Beyond (re-)establishing legitimacy for
into law.3 Another perspective, the lack of trust has been perceived as a an organisation, authentically pursuing
marketing concept, contends that the threat to companies’ ‘social contract’ a societally beneficial purpose reduces
purpose of business is to “create a or ‘license to operate.’ As Larry Fink, the likelihood of scandals that can arise
customer”.4 However, some companies CEO of BlackRock has written: from pursuing profits as the end goal.
have rejected these dominant This is especially important in today’s
views and begun emphasising “Society is demanding that companies, transparent digital era, where it is safer
company-transcendent, meaningful both public and private, serve a to create a business you are happy to
organisational purposes that guide and social purpose. To prosper over time, expose to the world.
motivate their decisions.5–7 every company must not only deliver
financial performance but also show Everything we do is exposed now given
But why? how it makes a positive contribution to the internet. We have to assume that
society.”8 absolutely everything we do is in the
Our interviews and review of the public domain, whereas in the past that
literature identify five main reasons. Since trust is what allows companies wasn’t the case. John Rosling, CEO,
to act without over-burdensome Contexis
regulation – or to exist at all – an
1. To increase and maintain eroded license to operate poses a For example, consider the large
legitimacy in business threat to corporate success. social and environmental objectives
of Unilever or M&S in their Plan A,
Organisations need to be clear about When facing a crisis in legitimacy, many which helps them achieve their stated
why they exist, and their actions companies engage in what is called a purpose. By declaring their objectives
and decisions need to underpin that corporate apologetic, or a defence for publicly, M&S and Unilever announce
purpose. That seems to me to be one their existence as an organisation.9, 10 to the world the benefits they bring
of the key actions that businesses can Organisational purpose can be seen to society. This provides the basis for
take to bridge the trust divide. Alison as a genuine corporate apologetic to stakeholder accountability while also
Sharpe, independent consultant on regain the trust of the community by creating socially-aligned reasons for
organisational trust and purpose, demonstrating the company’s authentic their actions.
formerly Director, Corporate Affairs, pursuit of improving the world around it.
at PwC Therefore, organisational purpose can
It’s about, on the defensive side, be seen as both a way to increase
In the last few decades, a large ensuring that a business has a businesses licence to operate in
number of corporate scandals license to operate in society, and the present and as a strategy for
(HealthSouth, the Bernie Madoff is sort of doing everything it can to minimising future corporate scandals.
Ponzi Scheme, Volkswagen, Tesco, insulate itself from the toxic effects
152. To attract, retain, and I’ve worked for professional services Finally, an employee who appreciates
motivate talent firms and for some banks. They are the meaning an organisational purpose
all realising that, with young talent, brings to his or her work will be hesitant
Organisations are the sum of their they want purpose. Why? Because to leave for a company that does
people. Staff are looking to be they want meaning in their lives. They not offer the same level of meaning.
encouraged, inspired, to feel happy at want to work for an organisation that’s Supporting interviewee beliefs, previous
work, to feel like they are contributing got a sense of meaning. And people literature has already established that
and working towards a purposeful are beginning to get that. Geoff meaningfulness at work is related
goal… the greater good. John Hutton, McDonald, Former Global Vice to both employee motivation13 and
Head of Sustainability, BAM Nuttall President of Human Resources, organisational commitment.14, 15
Unilever
Attracting, motivating, and retaining
talented employees are three critical After hiring, a deeply embedded 3. To foster strong customer
concerns for the modern business,11, 12 purpose is believed to motivate and stakeholder relationships
and organisational purpose is seen as employees by adding meaning to every
beneficial for all three. The main reason task undertaken. What we are hearing from customers
for these perceived benefits is the is, “we want you to stand for
ability of purpose to help companies A year into the job I took the staff away something”. Mike Barry, Director of
stand out. for the afternoon. We got some charts Sustainable Business, M&S
on the wall, and we asked some exam
Attracting and retaining talent is really questions. Things like, “I’d recommend Purpose has the potential to engender
tough. Especially in some industries working for (the company).” And, I just stronger relationships between the
at the moment. So how can you put a scale of one to five of “where are company and its other stakeholder
differentiate yourself as an employer? you?” You know, five is great, and one groups. Customers, for example, are
Many people will go to purpose as an is not great. I came back in the room attracted to meaningful company
anchor space for that differentiation. and was stunned because basically agendas and have better experiences
Meaghan Ramsey, Partner, everything was on the right-hand side, when they perceive a company
Brunswick right over on the right-hand side. I to be authentic16 and trustworthy.
mean the lowest score was 4.5. Scores This customer-company link is also
During recruitment, purpose is seen that you would kill for in corporate perceived to bring other benefits, such
as a point of differentiation, influencing finance. People went, it’s great …we as cross-category sales and higher
the talented person to choose the love it. Brendan McCafferty, CEO, renewal rates.
company over similar companies with Flood Re
equivalent offerings. This was seen as
especially significant for the younger
generation who may put working for
a purposeful company high up their
priority list.
16We sell cross-categories sales, where 4. To increase employee are known to drive increased
you love the brand so much that you psychological wellbeing performance, such as context clarity
are willing to choose that brand in and engagement.20
multiple categories rather than just the I mean, people are being burnt out right
one that you would normally. Executive now. The preponderance of depression Embedding prosocial goals may
in an international services firm and anxiety in organisations is getting also impact company creativity and
more noticeable. We are not looking innovation, such as it did with Unilever’s
While this may be an increased after the wellbeing of our people who Lifebuoy soap.21 If a company has a
investment in the short-term, it’s the work for companies today. Mental ill strong marketing platform to meet
right thing long-term for us and our health is costing economies billions. the real needs of its stakeholders,
customers. In the long run, those Geoff McDonald, Former Global to co-create routes to deliver its
customers are going to want to renew Vice President of Human Resources, purpose, and to signal the authenticity
their contract, recommend their friends. Unilever and usefulness in its actions, then
Amar Kumar, Senior Vice President, organisational purpose will become
Pearson Organisational purpose offers a powerful generator of sustainable
transcendent and meaningful profitability and long-term success for
A company that has clear and noble objectives not only to companies, but the organisation.
intentions is likely to be approached for to the individuals working for those
collaboration by stakeholders, such as companies. Self-transcendence and
governments and communities. They meaning are well known to increase
will come to turn to that organisation to psychological wellbeing17-18 and
solve when their needs, and those of even decrease depression in middle-
their service groups, are met through aged adults.19 A company that can
the company’s purpose-oriented fully embed purpose, will likely see
activities. Further, the fact that purpose improved employee wellbeing and all
is nested in a common goal to improve the performance benefits that follow.
wellbeing for all in the long-term means
that there is a clear basis for purpose-
driven companies to unite. However,
5. To increase business
where profit maximisation is the
assumed motive by each party, these performance
positive effects are much harder to
realise. Self-interest, self-protection and Purpose is your intention - your
tit-for-tat get in the way. resolution to be sustainable. It should
be life-affirming and life-enhancing. It
Interestingly, as well as unifying will make money. A lot of money. More
companies in a shared overarching than we do now. John Hutton, Head
purpose, organisational purpose of Sustainability, BAM Nuttal
also provides the basis of deep
differentiation. Since organisational The bottom line is that purpose-
purpose is a core attribute of an driven, people-centric, values-driven
organisation’s identity, it focuses on companies outperform. Not just
the company’s distinct contribution because they do better sustainably
to wellbeing. Therefore, purpose over time, but because they avoid the
provides a way in which a company risk. They avoid the Volkswagen and
can highly differentiate itself amongst the Tesco problems, and they avoid the
other brands through being clear about backlash that wipes 30% off their share
the unique contribution it makes to prices. Ann Francke, CEO, CMI
solving the big problems we face. This
aspect was mentioned by interviewees Every interviewee strongly believed
multiple times in regards to attracting that organisational purpose leads
customers, employees and other to improved business performance.
stakeholders. That could be today or tomorrow but
was certainly seen to be true in the
long-term. That bottom line result is
the outcome of the other benefits
summarised here, and beyond those
benefits, the authors of this paper
are also researching the potential
of purpose to improve a number of
cultural attributes which themselves
174. HOW: THREE CONSIDERATIONS FOR
ADOPTING AND IMPLEMENTING AN
ORGANISATIONAL PURPOSE
Let’s say you’ve recognised a need 1. Choosing the purpose and We sent out for the first time
for your organisation to become its framing a questionnaire to all of them
purpose-driven. [stakeholders] to try and understand,
For organisations that are not were we building long-lasting
Maybe you’ve seen purpose being sure what purpose would fit their relationships. And then we had some
adopted by other large, existing organisation or are cautious and rightly focus groups to try and understand
organisations. Perhaps you’ve want to ensure the purpose they have what the real issues were.
followed the success of Unilever with adopted is an appropriate one, a Laura Turkington, Senior Manager
its goal to “double its turnover while couple of methods for choosing and of Global Innovation and Business
halving its environmental impact”,1 framing a purpose stand out. Development, Vodafone
or BT with its purpose to “use the
power of communication to make a 1.1 Stakeholders 1.2 Origins
better world.” Possibly, you’ve talked
to one of the scores of consulting It’s very much a Board decision and So, what is our purpose? That’s not
organisations that help companies discussion, with stakeholder research too difficult if you go back to the
develop their sense of purpose, inside and outside around what might heritage of your organisation.
or looked at the many rankings of work. Director at an international Geoff McDonald, Former Global
purpose-driven organisations, noticing technology company Vice President of Human Resources,
how successful the firms at the top Unilever
are. The next question is: how do we The first method is consulting
go about starting the purpose journey? stakeholders. Purpose needs to The other strategy for choosing your
What are the insights from the early reflect the organisation’s identity, and purpose is to go back to the roots
adopters of organisational purpose when forming their identity companies of the organisation. For the older,
which could help with this profound often reach throughout their entire established firms we interviewed, who
change process? network for inspiration.2 The rationale were incorporated at a time when an
is that your stakeholders will enrich organisation’s service to society was
This chapter focuses on three your perspective regarding how you often a given, company lore often
major areas that stood out from our impact society. Employees, partners, contained a story of the founder or
interviews: peer organisations, and other external the founding of the company. This
stakeholders can all be contacted origin story usually described why the
• Choosing the purpose and its for input. One benefit is being able to company was started in the first place
framing make an informed decision to pursue a and named a societal need that was
purpose that resonates for the largest being met. Although the nature of the
• Embedding the purpose deeply number of, or the most important, need may have changed, the essence
stakeholders. This strategy was of the purpose can be contained in
• Identifying important organisational adopted by one of the companies we these roots. Identifying and reigniting
actors interviewed: this purpose was then the aim,
connecting employees with the ‘good
old days’ and restoring a sense of
direction that had been lost along the
18way. This “organisational nostalgia”3 is You need to do these things from We aren’t beating anybody up. We are
a common method of trying to create within, to live and breathe them from identifying the pitfalls and stumbling
fundamental, yet rooted, change within within and you role model those blocks and challenges, and we are
an organisation’s identity. behaviours. And if people see people saying ‘OK, yeah, we’ve done some
around them doing that, then they start great things and we’ve got some big
to believe, and they start to change things still to do.’ Tim Haywood,
2. Embedding the purpose their own behaviour Ann Francke, Group Finance Director and Head of
deeply CEO, CMI Sustainability, Interserve
Purpose is a core aspect of the However, these stories don’t all have to 2.3 Incentivise purposeful
organisation’s identity, embedded be positive ones. The authenticity and outcomes
deep within the organisation’s culture transparency that underpinned purpose
where it is constantly felt by the were seen as permitting the use of I think that purpose needs to be
employees and enacted through daily negative stories. embedded into objective settings
decision making. This also underpins and decisions right through the
the performance benefits of purpose. I actually feel that we do need organisation. The tone and example
However, embedding a new concept examples that show that not everything from the top must be mirrored in the
deeply in a company’s culture is difficult is good. If there are some bad middle… which is where a blockage
and there is no consensus on how to products, we must show what we’ve can often arise. You need to get
best approach the challenge. Creating done about them. Again, that goes to through the marzipan layer. Alison
an ethic of care and building trust the point about the authenticity and Sharpe, independent consultant on
were highlighted in our interviewees, transparency with which we are doing organisational trust and purpose,
including the critical importance of this. We really do believe this. And that formerly Director, Corporate Affairs,
acting consistently and increasing the means we aren’t going to shy away PwC
diversity of employees. Four particular from exposing information. That mind-
methods stood out as having been set can be hard for an organisation. An intuitive method of embedding
used successfully to embed purpose. Amar Kumar, Senior Vice President, purpose in an organisation’s systems
Pearson and processes (and therefore culture)
2.1 Stories and proof points is to include purposeful outcomes in
2.2 True transparency incentive schemes. However, examples
What you really want to do is show of this in practice are not widespread.
where you have made a positive Real corporate transparency forces Amar Kumar of Pearson offered one
difference and haven’t harmed the change... (and) with social media example of an innovation that occurred
bottom line. That you’ve actually and a whole new breed of NGOs or as a result of the company’s drive to
helped the bottom line. Director at an a whole new breed of activist, if it’s live its purpose, which had highlighted
international technology company not really transparent you get found a problem with high drop-out rates,
out. True corporate transparency undermining the company’s purpose to
One common suggestion is to show changes behaviour. Matt Peacock, deliver learning outcomes.
examples or ‘proof points’ where the Group Director of Corporate Affairs,
purpose was successfully followed Vodafone We used to run a lot of language
with great success. It’s important here centres in China… the people
to focus on the story’s meaningful One area with strong support was that who worked at those centres were
aspects when describing the actions of transforming your organisation’s incentivised by the number of people
that were undertaken, rather than just approach to transparency, as a key who came in. So they tried to get as
the change in process or operation. way to change the organisational many people into the centre as they
While many senior executives can culture, by enabling trust and hence could. And of course, no surprise,
make tangible changes – creating building the license to operate. Matt we had something like a 40 or 50%
purpose statements, adding purposeful Peacock noted how Vodafone’s first drop out rate. We changed the job
aspects to the objectives and policies transparency report helped to reduce descriptions and sales incentives of
– employees at the lower levels of the negative sentiment and build positive those people to be about how many
organisation focus more on meaning- sentiment between the organisation people graduated. All of a sudden it
level changes4. This means that the and stakeholders. Real transparency became, I have to get the people who
company needs stories, proof points can help a company work together are actually going to graduate and not
and examples of behaviour that with its stakeholders as it tries to solve just anyone I can find. They are still
continually show both the financial/ purposeful issues in the wider system, seeing the results of that in terms of
business benefits and the meaningful, rather than concentrating energy learner outcomes, but the intermediate
emotionally-compelling results of inwards. outcome of staff morale is through
change. the roof… People just love being
You will see that we are very open there now. Amar Kumar, Senior Vice
and honest in the things that have President, Pearson
succeeded and the things that haven’t.
19At the time of interviewing, the because we said that’s how you 3.1 Senior leadership
company did not know if the move galvanise an organisation. Internal
would be profitable or drive employee strategies, everyone’s got one. They You obviously need top leadership to
engagement but simply believed it are all on the shelves. We really need be shouting from the rooftops, ‘We are
would help more people learn rather to make a public commitment that purpose driven. Profit and purpose,
than just bring in short-term profits: will really force us to get this done. growth and impact.’ You obviously
in line with the company’s purpose, Amar Kumar, Senior Vice President, need that, because without that you
it was the right thing to do. Pearson have no credibility. Amar Kumar,
Senior Vice President, Pearson
2.4 Go public
3. Identifying important Senior leadership plays an extremely
One of the bravest things (the organisational actors important role in adding credibility
company) did was go outside. Talk to pursuing the purpose within the
about accountability around those The successful diffusion of purpose company. Publicly supporting the
goals! We could have kept that to throughout the company and to organisational purpose from the top
ourselves, but (the CEO) decided that the outside world, like most change signals advocacy and gives tacit
he was going to go to the external processes, relies on organisational permission to employees to act.
market Geoff McDonald, Former actors at multiple levels. Most Courageous and vulnerable leadership
Global Vice President of Human interviewees were adamant that styles were noted as important for
Resources, Unilever the purpose belonged to the entire garnering trust and confidence from
company, and all employees and employees. This leadership was
Going public with goals and purposeful stakeholders were important to important for building the trusting
objectives can provide a motivational achieving the company’s purposeful relationships that many interviewees
boost and provide a level of external goals. The Board or governing body is cited as foundational to purpose. John
accountability. Some companies, particularly important because it is the Rosling, CEO of Contexis, described
such as M&S, declare ambitious ultimate decision-maker and custodian this kind of honest, vulnerable leader
environmental goals and invite public of the organisational purpose.2 as, “A leader who says, ‘look I know
scrutiny of their progress. This not only However, reflecting current literature, I’m not getting all of this right, but I
signals authenticity but also creates an purpose has been mainly understood know what we have to do’”.
urgency within the company to achieve through a managerial lens.
the promises it has made. That view
was shared by several interviewees. Within management, two groups are
particularly important for the proper
I think, as we start to build the narrative implementation and diffusion of
stronger and bigger and bolder and go purpose in an organisation: senior
externally, people are going to get more leaders and middle managers.
motivated behind it. – Laura Turkington,
Senior Manager of Global Innovation
and Business Development, Vodafone
We launched a very public commitment
20You can also read
