Has corporate purpose lost its meaning?
The topic of corporate purpose is everywhere. The column inches and YouTube clips dedicated to the subject have been growing steadily. Amazon’s virtual shelves are bursting with ‘what is purpose’ books. And when international PR agencies start to appoint a ‘Global Head of Purpose’, you really fear the worst.
So, has purpose lost its meaning?
Fundamentally, I would argue no. It is more meaningful than ever. However, the problem with a trend or a buzzword is that it inspires a whole host of those trying to copy on the cheap.
What is purpose?
Purpose combines an agenda for change – i.e. a problem that can be solved - and a desire for positive societal or environmental impact. Ultimately, it is about shared prosperity or a better, cleaner, healthier and safer world. One would hope this is still a laudable objective.
True purpose should be a single-minded mission that runs through the DNA of an organisation. This, of course, requires bravery and commitment. Those using purpose as a veneer to dress up old behaviours will be quickly found out. Purpose is not a PR and marketing push. It should frame the way a business conducts itself, uniting an entire organisation it its mission. And it should be seen as a critical component in long term, sustainable growth.
Critically, there is an opportunity for purpose to continue to change the role of business in global society. This is why we should still champion its cause.
Beyond ‘shareholder value’ to ‘shared value’
The world over, we are already seeing a dramatic shift in how the best companies are being run. A shift in what drives them. A shift in what we expect of them. A new kind of leadership emerging. The biggest institution on the planet, global business, is slowly accepting a new role which extends beyond ‘shareholder value’ to ‘shared value’ and legacy.
And purpose-led businesses are themselves thriving. Studies show that such organisations are already outperforming the S&P500 by some way.
They exhibit faster revenue growth and are typically wary of wastage. They are often cited as the best employers; the places where people want to work. They gain recognition as product and service innovators, attracting loyal ‘fans’ not just consumers. They are finding a greater seat at the table in national or international political arenas. And commitments to back purpose are mounting, notably with Blackrock CEO, Larry Fink, stating that the world’s largest asset manager intends to screen out organisations that can’t or won’t articulate a ‘why’ from their investment portfolios earlier this year.
So, how did we get here?
Three trends that have contributed to the rise of purpose
There are a number of identifiable trends that have contributed to the rise of purpose:
#1 Shifting demographics
Millennials will represent 75% of the workforce by 2025. It is widely known that this younger demographic is hardwired differently to previous generations. They are more able to think and act globally and more considerate of their footprint in the world. Two thirds of them want to work for organisations that benefit society, demonstrate sound environmental stewardship or have a noble purpose.
#2 Technology enabled democratisation of information
The companies of the last hundred years evolved essentially as hierarchies, with information laddering up to the top of the organisation for the bosses to discern upon. Today information goes everywhere. Digital and social media has levelled the hierarchy of information and enfranchised the employee, the investor and the customer like never before. Consumer action, citizen journalism, shareholder activism or whistle-blowing can be louder, more global and faster than ever before. This changes the game.
#3 A world inspired by ‘better’
The pace of change in the world is accelerating. This brings with it uncertainty. It is human nature to desire progress over pure change. The potential to solve the significant and numerous challenges we face collectively, today and tomorrow, offers us hope for a brighter future. This in itself creates a new opportunity to belong to a progress movement.
The purpose revolution is far from complete
And yet, only 20% of global brands are seen to meaningfully and positively impact people’s lives. Many corporations have been slow to move. Some have quite simply been complacent.
Historically, the push-back has often been that corporations should be concerned by the returns they deliver for investors. But, purpose and performance are not mutually exclusive concepts. A focussed business, with highly motivated and dedicated employees, an army of supporters, a rout on wastage and a clean license to operate, has to be in better shape than one that has rested on its laurels, where morale is flagging, overheads are increasing and revenues are stagnating. Increasingly investors see strong adherence to environmental, social and governance factors as a key indicator of quality management.
To be effective, purpose must be compatible with success. You can’t create a brighter future if your company is bordering on bankruptcy. If your company exists to create the greenest detergent, stop. It is more viable and sustainable to create the best detergent, that is also the greenest.
Such focus and commitment also tends to deliver additional benefits; greater agility being one. Having a defining North Star enables faster decision making – “it either fits with our purpose and values or it doesn’t”. It empowers a team; allowing the organisation to act as one and achieve more. It keeps a company honest and focused.
But the real outcome of purpose is a way for global business to matter more in a less deferential society. A way for it to make a greater contribution. And, as a result, a way for it to grow faster and prosper for longer.
In the era of Donald Trump and Brexit, there is a growing opportunity and expectation for corporations to make their voice heard. To hold a public view on issues of consequence. To fill a void created by mistrust in a post-truth era. To stand for something.
Corporate purpose does this. Not all examples need to be as loud and proud as the Nike / Colin Kaepernick campaign. Some might be more subtle or nuanced and slower burn. But there is a place for many shapes and sizes; for many voices and deeds. After all, there are infinite opportunities to make the world a better place.