5 Steps for Putting Corporate Purpose Into Practice
Corporate purpose unlocks performance, resilience and competitive gains, as evidenced by a study of 28 high-performing companies that found ‘purpose’ was central to their ability to overcome declining growth and profitability.
Notwithstanding the success of leading companies, surveys show the gap between intent and action is large, which is why a process is much needed. A global survey by PwC found that only 28 per cent of employees felt fully connected to their company’s purpose, and a McKinsey survey of more than 1,000 participants found 82 per cent believed in the importance of purpose but only 42 per cent said that it had much effect.
What is purpose?
Purpose is essentially the promise you make to your customers about solving their problems and improving their lives.
People want to know what you stand for. Your chosen purpose must be recognised, revered and practiced thoughtfully by your workforce. It becomes your guiding light when difficult decisions and trade-offs must be made.
It’s not to be confused with corporate ‘vision’, which is the aspirational view of the world you want to help create by delivering on your purpose; or the core ‘values’ that define the essential behaviours you want to see in your organisation. Corporate ‘mission’ statements add further confusion as they often cross over into the ‘purpose’ space – I’m not convinced they are needed, so, in this discussion, we’ll focus purely on ‘purpose’.
How does it boost performance?
Leading companies are very clear on their purpose, they understand what they do and why they do it, unleashing the full potential and talents of their workforce; they use it to guide their strategy and fully embed it in their operations. Without it, you’re likely to see:
- A comforting statement on the wall that everyone ignores
- Overly competitive internal behaviours
- An undercurrent of your best people looking for jobs elsewhere
- Short-term profits undermining longer term value; and possibly
- A constant stream of blow ups, law suits and regulatory challenges.
Unilever was criticised for spending money pursuing its purpose of ‘making sustainable living commonplace‘. Following a failed takeover play for it in 2017, Kraft Heinz subsequently ‘blew up’ and wrote down $15 billion of assets as it completely missed the trend to healthier foods and severely underinvested in R&D and sustainability.
Kraft Heinz is great at acquisitions, cost cutting and leveraging up balance sheets, but not so good at creating sustained earnings and shareholder value. In other words, purpose matters.
Any business that pursues its ends at the expense of the society in which it operates will find its success to be illusory and ultimately temporary.
– Michael Porter & Mark Kramer
A statement is not enough
Producing a great purpose statement isn’t enough on its own, companies also need excellent strategic and operational skills, and a strong culture to realise the benefits. Business leaders must assess:
- Is our purpose improving the performance and growth of our business?
- Is it influencing our strategic and resource allocation decisions?
- Is it shaping the products, services and value we deliver for our customers?
- Is it a positive and motivating force for our employees?
- Is it embedded and integrated into everything we do?
If the answer to any of these is ‘maybe’ or ‘no’, then there is work to be done.
How does purpose influence strategy?
US property group, Grosvenor Estate, defines its purpose as ‘deliver lasting commercial and social benefit, contributing to the economic, social and environmental wellbeing of the communities we are part of’. Their CEO says it has led to some specific investments that they might not have made without their purpose being so clearly articulated. More importantly, he also says there are some investments they have not made as a result of their purpose.
Mars Petcare, the global leader in the pet food industry defines its purpose as ‘a better world for pets’, which propelled its expansion into pet health, a major shift from products to services for a 75-year old company. It included the acquisition of veterinary services in North America and Europe. Such transformations aren’t without risk and commentators point to the clarity of their purpose as a significant factor in pulling it off.
5 Steps for putting purpose into practice
Setting up a business for success requires its purpose to be well defined and it should be embraced and embedded from the board all the way down to the frontline. Your people must be energised by it, customers believe in it and your suppliers behave like true business partners because they’re coming on this quest with you.
In my experience, it comes down to the 5-step process contained in my Corporate Purpose Blueprint, and summarised as:
Compared to traditional business approaches, there is a significant mindset shift to be made in pursuing ‘purpose’. Organisations do not operate nor succeed in a vacuum, so the shift from an independent mindset to one of interdependence is critical, and it is futile proceeding without it.
How does your current purpose statement stack up? Does it represent a genuine societal need? Is it too broad or too specific? Is it elegant, concise and easy to communicate? Does it inspire your people to bring their best to work every day?
As a guide, when updating your own purpose statement, there are many considerations, such as how or why your organisation came into existence, what you are good at, prevailing societal trends and seeking input from employees and business partners.
Once you confirm your purpose statement, planning is required to put it into practice. For example, many purpose-led companies create pillars – usually three – to help break down the nature of the task. Senior and middle managers need to understand how purpose connects to their daily work, how it aligns with customers and how it affects external business partners.
As the Chair of IAG, Elizabeth Bryan, notes that strong leadership across the board is required to put purpose into practice. You will need to adjust some policies and processes, and add new dimensions to your monitoring, communications and reporting and so on. Nothing of value ever comes easy!
It would be disingenuous to claim that putting purpose into practice is simple. It’s exciting, though, because very few organisations get it right; they may struggle to get the genuine buy-in they need, they might set off with good intentions but fall short on implementation; they may panic when shareholders are breathing down their neck.
I believe purpose unlocks an extraordinary amount of value on many fronts – and it will set you up as a ‘good operator’ in this volatile and unpredictable world.
Phil Preston is an independent practitioner who guides executives and leaders in purpose-led business, and is the author of Connecting Profit With Purpose. He can be contacted on +61 408 259 633 or firstname.lastname@example.org, and you are most welcome to download his Corporate Purpose Blueprint.