Organisational Purpose; what is it and does it really matter?
Defining company purpose is increasingly becoming a discussion point at conferences and in the boardroom. The notion being that all companies need a true purpose, else they won’t survive the long haul. Last year’s Davos saw several leaders come together to emphasise this point; Branson being one of them – ‘Do good, have fun, and the money will come’ was his mantra. But does the ideal really translate to reality for the average UK business?
Simon Sinek inspired me to dig a little deeper on the subject. As a Leadership consultant and circuit speaker, he delivers very powerful fundamentals that make a lot of sense in the context in which he puts them, coupled with the typical American sugar-coating we’ve all become use to. Though can his fundamentals really ‘stick’ when applied to the majority of businesses rather than the few?
His summary logic is as follows:
The key ingredients to any business proposition are the ‘What’ the ‘How’ and the ‘Why’ with the majority of companies concerning themselves with the ‘What’ and the ‘How’ ie – the product/service and how they're differentiated, positioned and delivered. The ‘Why’ (ie purpose) typically being far less prevalent and more often than not, mistaken for financial gain. It is generally accepted that purpose cannot be profit or wealth; it is a higher goal, a reason for being with money as the by-product (sometimes). In Sinek’s words ‘most organisations communicate from the outside in – ‘from the clear to the fuzzy’ because once the notion of profit is taken off the table as a reason for being, the truth for a company’s existence is often not so clear.
The a-ha moment in his talk is that all exceptional organisations, and truly inspiring leaders don’t think like this at all; In fact they think in exactly the opposite direction and always start with the ‘why’. And when the purpose is truly addressed, the ‘how’ and the ‘what’ are merely manifestations to deliver it. He terms this ‘inside-out thinking’.
A good example of this approach is Anita Roddick, founder of The Body Shop. At the start of her journey, she held a true conviction with regard to the elimination of animal testing in the cosmetics industry. Her focus wasn’t money and neither would her success be defined by it. Success could only be measured by the extent to which she could achieve her [business and deeply personal] purpose. For her, the ‘Why’ was easy… in fact it was the only thing she knew 100%, as for the ‘how’ and the ‘what’, these would be worked out on the journey to delivering success. Roddick’s success enabled her to also pioneer ethical consumerism and much of Fairtrade as we experience it today. The results she achieved were far more lasting than annual shareholder returns.
Similarly, when considering organisations such as Apple, Virgin and Tesla, it’s very easy to understand immediately what they stand for – the ‘why’ – it’s the thing they knew 100% at the start of their journey; something had to change – the driving force being to create a vehicle to effect those changes. And with such a clear passion and direction, similar, like-minded people could and would readily join their respective causes, both as customers and staff. The recent Tesla 3 launch demonstrated the power of alignment to purpose, generating in excess of 400,000 pre orders before anyone has seen the actual car.
Tesla CEO, Elon Musk’s journey may have taken a different turn in the hands of most others; From Zip2 to X.com to Paypal, he generated $180m of personal wealth from an initial loan of $28K from his father. As is widely documented from studies of many successful business leaders and entrepreneurs, at some point a level of risk adversity comes into play, children, legacy, change of life and so on. But for a few, it’s not even a consideration. Musk bet all of his $180m on furthering what he felt to be his life’s true purpose, to further humanity. $100m to found Space X, a venture to enable exploration of Mars and ascertain its viability as a second home to the human race, $70m to fund Tesla a company hell bent in furthering the automotive industry as whole, not just its own position (allowing its technology patents to be freely used by all competitors in good faith!) and $10m to establish Solar City.
Musk effectively spent his entire fortune to further humanity, the latter two investments to stave off global warming and the former to enable us to ‘hot foot’ it to another planet if we can’t! A man so driven by purpose (it seems) he’s willing to be utterly unreasonable in his investment decision making and his acceptance of status quo – the governments weren’t doing enough, so he’d do what he could. And he nearly went broke over it. Though today, worth an estimated $14.3bn at age 44, he has undoubtedly achieved a level of success far beyond expectations of running a business on the traditional non-purposed based metrics.
With a clearly understood purpose, staff, prospects and onlookers can decide quickly if they are aligned to that reason-for-being. The logic is that the purpose of any person or organisation is an emotional stance and it appeals to the emotional part of our brains – we can make quick judgements as to whether it fits with our beliefs or not. Whereas the ‘how’ and the ‘what’ are a far more rational proposition which needs a different type of evaluation. If the customer is attracted to why we exist rather than what we do, the relationship is likely to be far deeper and long lasting. Similarly for any long lasting interpersonal relationship the attraction is who we are, not what we do.
This is at the heart of brand building. Chris Spencer, a brand strategist at the forefront of thinking in this area in the UK, believes that the 'why' conversation has become increasingly important to business leaders. 'In a nutshell, when you disrupt the profit conversation ('we make widgets to make money'), which is true but a dead-end, and talk about purpose, you are making a stand that customers and users can connect to in their own minds. This is the ‘Holy Grail’ for brand builders because it creates value beyond the sales figures. The trouble is that 'doing' purpose is not at all easy because it usually means bucking business norms, overcoming office politics, thinking longer term, and opening up a new level of risk. It is very much a road less travelled - which is why there are relatively few examples around.'
Strategic Factors’ Graham Kenny draws the distinction between purpose, mission, vision and values (many confuse purpose with mission) when writing in the Harvard Business Review, yet goes on to reference purpose statements from companies such as Kellogg -‘Nourishing families so they can flourish and thrive’. As a parent who’s eternally educating his children as to why chocolate filled ‘Krave’ doesn’t offer a nutritional start to their day, I struggle to see how this purpose statement is anything more than a marketing communications strap line.
But it’s not just Kellogg; I find myself frustrated with many corporate entities claiming to have a moral compass but with seemingly little action to demonstrate this. Consider the PWC purpose statement – ‘to build trust in society and solve important problems’… I struggle to make the connection with this ‘reason for being’ when the Public Accounts Committee released a report last year stating ‘We believe that PricewaterhouseCoopers’s activities represent nothing short of the promotion of tax avoidance on an industrial scale.’ The US Senate also recently released a report into ‘Caterpillar’s Tax Strategy’ finding $55M in fees to PWC bought Caterpillar a structure to move $8bn of profits from the US to Switzerland enabling $2.4bn of tax to be avoided. Where is the trust in society being built there? And this is before the Mosseck Fonseca laundry is aired fully which is likely to show a vast number of companies acting in a way that, even if completely legal, is at odds with the moral compasses they claim to follow.
Speaking of trust, how does VW or Mitsubishi rationalise their actions with regard to their core beliefs? VW doesn’t have a stated purpose or mission, but the closest it gets is to release a paragraph relating to annual goals. In 2013 it stated “The Group’s goal is to offer attractive, safe and environmentally sound vehicles which can compete in an increasingly tough market and set world standards in their respective class.”… Similarly, Mitsubishi published a set of values for its Motor Division, including Fairness: Acting with impartiality and good judgement and Honesty: Building trust by words and actions. Whether tampering with emissions or fuel consumption, the actions of both these companies is utterly at odds with their stated values and goals.
Spencer says that this sort of behaviour devalues brand-building: 'Colleagues, customers and users are empowered by social technology and can see now what brands are doing in detail, 24/7 - if they are not being who they say they are, the cost can be huge. VW has lost billions (£12.6bn by their own estimates) and will continue to do so as they seek to message their way out of their problems rather than owning what happened and getting back to purpose. Purpose goes hand in hand with trust. It has to be authentic or it doesn't work. The good news is that purpose doesn't have to be high and mighty - it can be simple and straightforward. Just don't not mean it.
The key is therefore to recognise that what your company does is a direct reflection of its beliefs. Making tough decisions when under financial pressure is the real test of where True North lies; is it with the CFO and stakeholders or with the underlying company purpose?
Alastair Conway is CEO of Salisbury based James Hay Partnership, a 600-man company managing £20bn of assets for 56,000 UK customers. I asked him whether he felt his business had a true purpose; ‘We have an “anchor” in our business which is represented by a specific phrase – “Enabling you to manage your retirement wealth”. Every time we make decisions within our business, we encourage all staff to consider whether the decisions being made are directly contributing to our core anchor, our purpose.’ I challenged this thinking, suggesting that this ‘anchor’ was the proposition not the purpose, it’s the ‘what’ the company does, not why it does it. Conway was quick to respond ‘Taking the worry out of the 15 years leading up to retirement and all the years during retirement itself is a significant responsibility; enabling this to happen effectively is at the heart of what we do’… ‘yes it is, but not at the heart of why’, I goaded a little! ‘You’re right’ he said ‘I’d love to be the guy that changes the entire industry, transforming how people think about this period in their lives. I’d love to establish an emotional connection with our customers and prospects as well as the obvious rational connection. But how far I can go down the continuum of true purpose is a continual balancing act between running the company now, delivering to shareholders’ requirements, 600 staff and current expectations of 56,000 customers who’ve already committed to us!’.
And of course he’s right, as a CEO of an organisation this size, he is burdened with the commitment of maintaining the running of a highly successful company and ‘if it ain’t broke, don’t fix it’. This scenario certainly challenges the idea that companies can’t be truly successful without a purpose beyond profit. Who says? James Hay Partnership leads its sector, has a motivated workforce, happy shareholders (profits are strong) and 10’s of thousands of satisfied customers… all this without a true ‘why’ beyond doing what they do very well.
Yet it’s not only applicable to this size business. I recently spent several months overhauling the sales strategy for a FTSE company with over £1bn market cap, yet all the same restraints applied; at every turn, the opportunity to take the higher ground for material long term benefit, the pressure for short term deliverables tempered truly inspirational steps being taken.
But what if you have a 100-man business turning over £10M, in a market place with many competitors. Should your company have a central purpose, beyond happy customers, happy staff and creating shareholder value? Whether listening to Branson, Sinek, Fisk Johnson (CEO of SC Johnson) or Unilever’s CEO Paul Polman; the answer is ‘yes’, they all advocate ‘purpose before profit’.
Sinek points out that it’s only the exceptional few who think in the opposite direction. Therefore by definition, there are millions of businesses globally that achieve levels of success while focusing only on the traditional elements such as route to market, sales cycles, marketing efficacy, market differentiation and so on, without allocating time for what they would consider to be organisational or personal introspection.
Let’s assume though that you want to optimise your position, get the most out of your opportunity; even if you’re not as focused as Elon Musk with a commitment to populate Mars, can you retro fit a purpose to your business? Of course, it’s always possible to construct something and communicate it, but can it be real purpose, not just marketing communications. An ‘anchor’ which can be used as guidance for decision making at every level?
Spencer agrees: 'It's actually all about the will of the leadership. In my experience you can work with almost any business or organisation that is willing to go through a facilitated process and arrive at a powerful purpose, because purpose is usually latent in every organisation and the sector it's a part of. But like any real commitment to transformation, it then requires a whole new level of direction, energy and effort - aka belief - to make it happen! Otherwise it's just messaging and everyone sees through that. It's not about the words, it's about whether the leadership is ready in themselves to go for it despite the odds, despite themselves, despite the fears of colleagues and shareholders etc. Change is difficult. Transformation is rare. But it's available to us all. Purpose gets snipped away at if it's simply done as a cynical sales ploy because there's nothing behind it. So if you want to do purpose you'd better be willing to dare yourself.'
From my own experiences, perhaps 2 of the six companies in which I’ve invested and grown have had real purpose – a real passion at the heart of them that dictated a true North for every decision. One being a sizable cemetery business in London, with the founding premise that it was ‘A place for the living’ and ‘Death doesn’t have to be all about dying’. As with Roddick’s stance against animal testing, which tapped into the zeitgeist of the era, we identified an increasing discontent with the lack of choice, time and customer service offered in cemeteries today. Though, it’s relatively easy to be different and stand for something that challenges norms in a sector that is so desperately in need of modernising.
Yet among others, we also built a successful digital agency and a Solar Technology business with the sole intention of creating shareholder value and with very little in the way of purpose – though we had a good vision and strategy, but it was focused solely on financial success. It wasn’t wrong, the question is though, could they have been more? And, if I’m brutally honest with myself, even those businesses we built with a centred purpose; all had a primary focus on creating shareholder wealth through success – in none of them would we have accepted success as a societal level change if the financial reward hadn’t accompanied it too.
Do I believe that there is a bigger picture to be embraced? An opportunity to truly be transformational at a sector and societal level? Yes I do and I suspect leaders like Conway have the combined insight and experience to map this path. But leaders in his position will almost always be restrained from taking perceived leaps of faith or departing from business norms, by stakeholders protecting the status quo. In fact a departure from the norm is often seen as unreasonable, a trait that runs through many of the highly successful entrepreneurs.
Probably the most famous departure from the status quo of a major corporation was announced in the 1997 Steve Jobs speech 8 weeks after his return to Apple. Inspired by Nike, he noted its campaigns had little to do with trainers but instead were focused upon honouring great athletes and athletics – something that was at the heart of its business. Jobs too wanted to get back to core values and focus on the passion of the people, not the products. Stating ‘I’m going to upset people who expect me to communicate how we’ve got better plug and play, but we’ve got to let people know who Apple is and why it’s still relevant in this world. This was the launch of the ‘Think Different.’ campaign, honouring people who have changed the world… ‘the crazy ones, the rebels, the ones who have no respect for the status quo… the ones who push the human race forward’, which aligned with both Jobs’ and Apple’s purpose. A far cry from promoting product proposition and differentiation as is typical from most companies. Many deemed Jobs’ actions to be unreasonable, but to him it was utterly clear; he was reclaiming a purpose that had been lost during the twelve years since his departure in 1985.
Perhaps the insight is that all great organisations and leaders have to start from a position of being unreasonable? They don’t accept the status quo, the industry norms and social expectations. Apple products are often not a capable as its competitors yet priced significantly higher; that’s unreasonable! But Apple products as with Roddick and Musk’s propositions are predominantly bought by people with a passion for the business and what it stands for – they’re buying the ‘why’ before the ‘what’ – it says something about themselves and what they stand for too.
How can the average business re-orientate itself from outside-in thinking to inside-out? In the annual strategic planning processes, business leaders, of all sizes, should be injecting the ‘why’ into the mix, before market segmentation, product development and communications planning. The biggest prize is found in connecting with the market at an emotional level – it’s a win/win and of course all the other business disciplines still follow, but when building on a foundation of real passion, everything becomes that much more effective.
It’s not a case of choosing one or the other; your company doesn’t have to be reinvented tomorrow and risk the ‘baby being thrown out with the bathwater’ I.e profits lost at the expense of idealism. Plotting a tangible path towards an increasingly purposeful stance, while maintaining the core business success, is not only viable, but essential. Put yourself in your prospects and customers’ shoes and ask yourself how could this sector or category really change for the better? Rather than challenging attempts at purpose with a justification in financial terms, try reversing this at every opportunity and ask yourself ‘just what is being achieved in the bigger picture?’
For it to succeed, the reason for being has to be something that everyone in the organisation can connect with; this is not just a boardroom initiative. If manifested correctly, it will provide a true North for all employees and will deliver a measurable effect with regard to engagement and retention, as well as increasing the emotional alignment with prospects and customers.
Purpose and profit are not mutually exclusive and if combined effectively will produce extraordinary long-term results.
