Business leaders today increasingly acknowledge their organisation should have a purpose. But the question many fail to ask is: why?
Our CEO Sacha Romanovitch and David Grayson CBE, Emeritus Professor of Corporate Responsibility at Cranfield University discuss why ‘purpose’ is key to relevance and long-term commercial success.
This was the starting point for an event at our Finsbury Square office in March 2018. Part of our Vibrant Economy Business Breakfast Series with Cranfield University, the discussion probed a subject at the core of our strategy.
According to David, a purpose is more than just a slogan, a campaign strategy or CSR. Purpose is something that should run through the veins of an organisation. Taken seriously, it offers advantages that shouldn’t be underestimated.
David has written and spoken extensively about organisations with purpose and the forthcoming book ‘All In: The Future of Business Leadership’ he has co-authored with Chris Coulter and Mark Lee, defines purpose as an explicitly stated vision and authentic belief that defines the value that the company seeks to create for itself and society.
“There has been a false, and dangerous, view led by the late Milton Friedman that businesses only exist to maximise shareholder value,” he says. “This is the idea that businesses are there to make a profit, rather than making profits so they can exist for a larger purpose.”
There is no such thing as an ‘off-the-shelf’ purpose, according to David. Companies must define a relevant purpose for themselves. This has to be genuine, convincing and embedded throughout the company.
While purpose has been seen by some as something that is discreet and which can be compartmentalised within the CSR function, its real benefits are now being identified and better understood.
Why do organisations need purpose?
“One consequence of globalisation is that we can have these vast enterprises operating in 100, 150 territories. Having any kind of corporate ‘nationality’ is questionable. Purpose gives them an identity they can own and it also enables them to return something to the societies they work in.”
This sense of positive identity is important to businesses of any size. As the pace of change in the world accelerates, many people worry about letting go of traditional values. And they care about the values of the organisations they choose to work for. An embedded purpose attracts both the conservative - as well as the more outward facing and altruistic.
Our research shows purpose unlocks sustainable growth in organisations. OurPlanning for Growth Reportfound that 43% of high growth businesses believe that investing in their purpose helped them to the next level of growth. Purpose is the ‘north star’ that inspires bold decision-making and aligns their people with their strategy.
According to David, purpose delivers three benefits.
1 The organisation gains greater clarity on what it is there for, clarity that supports decision-making and strategy.
2 Purpose becomes the basis of a deeper relationship, a common thread facilitating greater and more efficient communication between employees, partners and customers.
3 Finally, as more businesses see the importance of collaboration with partners, purpose becomes a key differentiator. “Purpose helps to deepen your relationships with everyone. As a business, do you want to be seen as a neighbour of choice or a hostile invader?” he adds.
Our Planning for Growth Report also highlights the connection between people and purpose. The ‘Growth Generators’ (high-growth businesses) that the report studies have a clear purpose which connects their people and the culture of their organisation. “This underpins their strategy, provides certainty in an uncertain world and gives them the impetus to strive ahead with confidence,” it states.
Where can we see purpose in action?
In our 2016 Strategic Review, our firm’s purpose was articulated simply: to shape a vibrant economy. We identify three areas where we can bring this purpose to bear. These are areas which we identify as key to a thriving economy and believe we can make a real contribution. These are: building trust and integrity in the market, unlocking sustainable growth in dynamic organisations and creating environments where businesses and people flourish.
“This came from a recognition that businesses do not thrive in isolation,” says Sacha. “At the time of the financial crisis there was feeling that the world was happening to us. We had to become part of society if we were going to make our own destiny. For us, purpose began with trust: giving people an anchor in a world of infinite choice, a world where people choose to work for meaning.”
Our longstanding strategic decision to focus on working with dynamic SMEs is significant, too, according to David. This type of organisation, he suggests, often has a genuine purpose associated with it; a unified vision that has helped drive early growth.
He highlights outdoor clothing brand Patagonia as a company executing purpose well. The US firm is a company that has embraced nature from its earliest days and has always strived to be a net contributor to the planet. It is one of the early B-Corps.
“B-Corps are interesting,” he says, referring to the certification system created by the non-profit B Lab. This was built to assess businesses against rigorous standards of social and environmental and economic performance, accountability, and transparency. “These businesses are clearly following a purpose but are also commercially successful, and this is what is helping them. It is not a binary thing.”
“Success, profit and purpose aren’t mutually exclusive.” David continues, “The fact that companies who have a positive purpose, like B-Corps, can be more profitable in many cases is significant. When I meet with companies that are pursuing B-Corp status, there is an assumption that whilst this is not a guarantee of success, it gives them a better fighting chance for the future.”
Sacha agrees with the relation between purpose and profit. “There is a growing body of evidence that proves purpose makes for better long-term decisions, and strategies that build better businesses,” she adds.
Does your organisation have a purpose?
Our Planning for Growth Reportsuggests four critical questions that will test your company to see if it has a purpose-led culture:
Does your business stand for something other than making profits?
Does the board understand and reflect your purpose?
Is your purpose embedded across the functional areas of your business? From recruitment and rewards to communication and the supply chain?
Do you measure the effectiveness of purpose on culture?
How should you use purpose?
There is a new generation of entrepreneurs that combine profits with purpose, and understand that it can be a route to better commercial performance. There are also family businesses that already have an embedded purpose, who have a sustainable mindset and a sense of responsibility by virtue of being embedded in their community, with examples including: food purveyor Blakemore Fine Foods, newsprint manufacturer Palm and the construction and management firm Willmott Dixon. These are old companies whose heritage invests them with a common thread that translates to a purpose.
“From Grant Thornton’s perspective, we realised that we had such an influence over so many clients that the positive thing would be to use these relationships for change, to change the world for the better,” says Sacha. She cites the collaboration with Cranfield School of Management as one facet of this influence being leveraged, creating a partnership so that our company purpose can magnify its impact. Another manifestation is in client management; those clients that do not fit with our purpose may need to think again. “Are we saying all our clients need to be perfect? No. But they have to grow in a sustainable way, a responsible way that accepts a wider responsibility to society. In this way, we help them find purpose.”
Businesses actively looking for their purpose should take a moment to pause and think before rushing in, says David. “You don’t change purpose like an advertising campaign, you take it seriously and think it through; what is the best way of clarifying your purpose?”
The recent news reports of technology giants are sobering examples of purpose losing its way. He suggests that these companies may have fallen under the spell of imagining that all their actions had ‘purpose’, through the sheer merit of being innovators and disruptors. Yet under scrutiny, purpose can fail if it is not embedded deeply enough in a company’s core and consciousness.
Purpose is a force that binds a company together and connects it to the outside world in a sustainable, commercially positive way. It’s not just a component of success: if correctly identified and implemented, purpose is success in its own right. “If your purpose influences every part of the organisation, it provides a progressive outlook and long-term sustainable growth, laying the groundwork that helps navigate negative issues in future.”
Trust however is essential. You have to trust and believe in your purpose; in turn, you will be trusted.
Professor David Grayson’s questions to ask yourself about purpose:
Has your organisation already got a societal purpose?
Is it authentic, and lived?
Do you have the resilience to adhere to it?
Are you willing to invest the work in embedding it across your organisation?
Do your employees recognise it?
Is there a gap between what senior executives think and what employees understand?
If the answer is ‘yes’ how will you fill that gap?
How will you safeguard your organisation’s purpose into the future?