Each month we will be sharing four, carefully-chosen articles from the Latest Issue of our flagship publication ‘theHRDIRECTOR’ which exemplify the high standards we strive to achieve. We hope you find this in-depth article of interest and decide to become one of our valued Subscribers.
In recent times, business crises has demonstrated the harm of myopic focus on profits and maximising shareholder value. We face a systemic problem and solving it means asking deep questions about some of the basic assumptions shaping how businesses behave. The ‘big idea’ that attempted to improve how business interacts with society, corporate social responsibility, looks weak and outdated. Consequently, a shift in priorities is needed to recalibrate purpose vs profit.
Article by Beatrice Farina, Chief Marketing Officer – Chartered Management Institute
We’re seeing a change in philosophy and practice about how businesses are run, changing society for the better. After all, it’s possible to run a business with purpose that benefits shareholders, the workforce and society holistically. We conducted research and interviews with leaders from 14 of the biggest UK and international brands, including; BT, Unilever and Marks & Spencer, to discover why companies are becoming purpose-driven and how they are can successfully align purpose with their vision. Purpose is an organisation’s meaningful and enduring reason to exist, according to the recent whitepaper The What, the Why and the How of Purpose. Purpose aligns with long-term financial performance, provides a clear context for daily decision making, and unifies and motivates relevant stakeholders. There’s a direct link between a company’s mission, vision and purpose – the vision is what the company is trying to achieve, or the ‘destination’; the mission is how it is going to get there, and its purpose is why it is doing any of this in the first place. To intrinsically embed the mission, vision and purpose in an organisation, they must be aligned. After all, purpose is at the core of the organisation, its DNA, helping businesses pursue long-term value by clarifying its core identity. According to Geoff McDonald, Former Global Vice President of Human Resources at Unilever; “Purpose is bringing a sense of meaning to the organisation. It’s about answering the question ‘Why do you do what you do’?” An organisational purpose that is authentically implemented should be a motivating force for individuals within the company and for its stakeholders.”
“Purpose-driven, people-centric, values-driven companies outperform. Not just because they do better sustainably over time, but because they avoid the risk. They avoid the Volkswagen and the Tesco problems, and they avoid the thing that wipes 30 percent off their share prices”
One misconception that often rears its head is that purpose means a sacrifice of profits. But research illustrates that integrating purpose into the foundations of an organisation will deliver a rise in financial performance over the longer term. An organisation’s purpose is a key driver, giving direction to all stakeholders, internally and externally. Purpose is a useful reminder of an organisation’s mission, why it exists, and what it’s setting out to achieve.
Businesses are becoming purpose-driven to increase and maintain legitimacy in business:
“Organisations need to be clear about why they exist, and their actions and decisions need to underpin that purpose”, said Alison Sharpe, independent consultant on organisational trust and purpose, formerly Director, Corporate Affairs, PwC. In recent years there have been a number of corporate scandals splashed across the front pages of the newspapers – Carillion, Tesco and Volkswagen are headline examples – and this has eroded public trust in business and placed greater demand for companies to prove not only how they can deliver financially, but how they give back to society. When organisations align their vision with a genuine business purpose, it helps build trust and demonstrates the organisation’s authenticity and desire to give back to society – something customers and prospective employees are increasingly searching for: “Organisations are the sum of their people. Staff are looking to be encouraged, inspired, to feel happy at work. To feel like they are contributing and working towards a purposeful goal…the greater good”, said John Hutton, Head of Sustainability, BAM Nuttall. Purpose helps companies stand out, particularly during the recruitment process. Increasingly, millennials are attracted to employers who portray a clear purpose making it a growing priority when job hunting. Not only does purpose help to attract talent but it also makes employees more hesitant to leave for a company that doesn’t offer the same level of meaning – a useful tool in talent retention. “What we are hearing from customers is “we want you to stand for something”, said Miles Barry, Director of Sustainable Business, M&S.
Businesses that clearly align purpose with their strategy are more likely to foster stronger relationships with stakeholders. Purpose provides a platform for differentiation against competitors through demonstrating the unique contribution an organisation makes. Meanwhile, Geoff McDonald, Former Global Vice President of Human Resources, Unilever stated: “The preponderance of depression and anxiety in organisations is getting more noticeable. We are not looking after the wellbeing of our people who work for companies today. Mental ill health is costing economies billions.” Organisational purpose offers meaning, not only for the company, but for its employees too. A company that can fully embed purpose, will likely see improved employee wellbeing and increased employee performance:. “The bottom line is that purpose-driven, people-centric, values-driven companies outperform. Not just because they do better sustainably over time, but because they avoid the risk. They avoid the Volkswagen and the Tesco problems, and they avoid the thing that wipes 30 percent off their share prices.” Said Ann Francke, CEO, Chartered Management Institute. Aligning purpose with strategy delivers results. It’s a motivational tool, encouraging employees to perform and giving them a reason for their work beyond financial rewards. As we’ve seen, this is an increasingly important business trait among millennials, helping to attract young talent.
There are three major areas for consideration when implementing purpose that can’t be overlooked; choosing the purpose and its framing, embedding the purpose deeply and identifying important organisational actors: When determining an organisation’s purpose, the first step is to consult stakeholders. Purpose must reflect not only an organisation’s vision, but its identity. Whether its employees, partners or peer organisations, they can all provide input to help determine a purpose that resonates for the majority. The second step to consider when choosing purpose is going back to the roots of the organisation – why was the company started and what societal need was being met? While this may have changed, the essence of purpose can be identified in the company’s roots. Embedding purpose deeply into an organisation is not an easy task. Four ways in which companies can approach this are; stories and proof points, true transparency, incentivise purposeful outcomes and going public. Providing examples of companies that have benefited from aligning their strategy vision with purpose demonstrates that it does work and encourages its adoption throughout all levels of the organisation.
Changing organisational culture can only be done with a transparent approach. Not only does transparency help a company work with its stakeholders, it helps to build trust among staff – a key issue for businesses according to CMI’s The Middle Management Lifeline report, which found that only 36 percent of middle managers trusted their leaders fully. A successful way of embedding purpose in an organisation can be achieved by integrating objectives is to include purposeful outcomes in incentive schemes. Announcing a company’s purpose not only invites public scrutiny – a sure-fire motivator to succeed – it signals authenticity and encourages an organisation to deliver on its promise. Implementing purpose and strategy successfully through an organisation relies on empowering an organisation’s actors to integrate it throughout a business at multiple levels – it’s no good just sitting at the top. Senior leaders and middle managers have a key role to play in communicating this through the organisation. The example and support needs to come from the top down – signalling advocacy and encouraging employees to follow suit. Senior leaders add credibility to aligning purpose with company strategy. Middle managers communicate the message between senior leaders and the rest of the organisation. A lack of buy-in from middle management could significantly undermine the adoption of purpose within an organisation.
The transition from a pure profit-driven focus to one aligning genuine business purpose and strategy will see companies reaping the rewards – whether that’s increased trust, business performance or better stakeholder relationships. Companies are beginning to note the shift among millennials and customers to organisations with purpose over profit. As we know, listening to stakeholders pays off, and in coming years no doubt we’ll see more companies catching on to the fact that aligning their strategy with purpose will not only benefit society, but the companies too.
