Purpose-led transformation strategy
By Rick McCarthy – MD Training Leadership Consulting
Do you know your company’s purpose? Many executives think that a company’s purpose is simply to maximise shareholder value. Would it surprise you to know that a growing number of executives have a broader definition of their corporate purpose that includes factors other than shareholders and profits?
When I started blogging and sharing this idea, a CEO of an established, blue chip South African Company asked me if there was any higher purpose then being profit driven. Make no mistake, Purposeful companies seek to make a profit. But they also make addressing social problems, customer’s needs and the welfare of their employees a central part of their strategy.
My answer is that Profit and Purpose can and must co-exist considering today’s social and corporate changes. I suppose being profit minded and purpose-led is a lot easier for a start-up or entrepreneur-led companies. These leaders have to be clear about their reason for why they want to do what they are doing as well as attract new talent, customers and investors. An existing, long-standing company is either already purpose-led (Starbucks, Discovery Health, Google, Ben & Jerrys, Patagonia) or will get increasing pressure to expand its purpose to include all of its constituents.
Business leaders are now talking about Shared Value, Conscious Capitalism and Purpose-Led organisations. Shared Value is defined as: creating economic value while addressing social needs and challenges. Conscious Capitalism is: a mode of doing business that attempts to create value for all stakeholders, employees, customers and the community. Yes, a company must be profitable. When we talk about being Purpose-Led, we are not pursuing a socialist agenda. We are conscious that employees need a reason to go to work and they want to know that they are working for a company that is making a positive contribution to society. Customers also want to buy from companies that are doing the same.
Let’s look at this topic in another way. Do you know your own purpose? Have you given it much thought lately? Mark Twain said, “The two most important days of your life are the day you were born and the day you realise why.” Yet many people devote their life to someone else’s purpose instead of their own never understanding what that is. What happens when someone identifies their life purpose? Well, the old saying goes, do what you love and you’ll never work another day in your life.
This is what happened to Gail, the Senior Vice President of HR for an international software company with a 34-year service history who resigned from her job after realising that her purpose and that of her company were no longer aligned. Gail is now in pursuit of finding or creating a purposeful company that is in line with her own.
While I don’t see it as the purpose of this article, to get people to quit their jobs, I do see it as a possible outcome once someone realises that their life means more to them than to fulfill someone else’s purpose. I suppose on a personal level that is what understanding Purpose is all about. First understand your own purpose. Then find, establish or realign a professional organisation that allows you to fulfill your purpose or feel a part of the greater purpose of the company. Doctors get this, ministers get this, charity organisations all over the world get this. And more and more ‘for profit’ companies are getting this too. The momentum is shifting and you will see more people doing exactly what Gail has done.
Purpose-Led companies are not just doing good. They are doing well. A recent survey showed that purpose-led organisations have outperformed the S&P 500 by a factor of 10 between 1996 and 2011 as reported in the book written by Raj Sisodia, Firms of Endearment. Employees are 1.4 times more engaged, 1.7 times more satisfied and 3x more likely to stay, according to the Energy Project, 2013. And 72% of global consumers would recommend a purposeful company.
Shifting to expand a company’s purpose beyond shareholder value for an existing company is a challenge.
There are 5 reasons why a company would make this shift:
1. New CEO appointment
2. Reinvigorating and accelerating growth and innovation
3. Establishing a new brand essence and relevance
4. Integrating merged or acquired businesses
5. Building a new business model and basis of competition for value creation
If you want to learn more about this topic, register for the KZN Lean Conference powered by Vodacom and co-produced by The Pietermaritzburg Chamber of Business and Training Leadership Consulting. The Conference is being held at the Hilton College Theatre on 30 September – 1 October. Kris Pederson, Head of Purpose-led transformation for EY in America will share her experience helping successful companies. Register for the conference at www.pcb.org.za or call 033 345 2747