0PurposePurpose

A framework for purpose

Companies that have the “it” factor, are conceived by enthusiasm and passion that lights up employees, delights customers, and shines for investors. They have a purpose which clearly answers the question: “What would the world lose if your company disappeared?” Purpose defines a company’s core reason for being and its resulting positive impact on the world. Winning companies are driven by purpose, reach higher for it, and achieve more because of it. 

Reality check: Purpose cannot be added easily to a company’s mix. A superficial approach to purpose doesn’t work. In fact, it can do considerable harm, opening up a company to accusations of inauthenticity or “purpose-washing,” turning off customers or driving them away completely, and disaffecting employees up and down the organization. Poor outcomes follow when purpose is a patch job.

On a positive note though: companies with a genuine, lived purpose radiate authenticity and do well by doing good. Customers, suppliers, partners, and investors recognize the value proposition. Senior leaders allocate capital and resources with purpose in mind. And employees think about purpose all the way, making it a part of their decision making as a matter of course. Building those dynamics doesn’t come easily. It requires leaders to embed purpose throughout the organization. Purpose must connect with the company’s “superpower”—its unique ability to create value. Purpose is not the same as ESG. Purpose is each company’s raison d’être.

It’s relatively easy to develop a mission statement or kick off a purpose initiative. Most organizations have sought to define their purpose at some point or other, and many think it important to ensure that the company’s purpose is embedded in everything it does. But leaders also know that’s not easy. Perhaps that’s why companies announce purpose changes so often. “We’ve had so many purpose initiatives,” one European group CEO stated lately, that “at this point, they just wash over me.” A useful analog is transformations; about 70 percent of them fail to reach their stated goals, in large measure because they fail to change—and sometimes fail to even think of changing—the mindsets and behaviors of employees. 

Purpose should be systemic and rational, but also emotional; it should resonate with members of each organization and inform their decision making. 

Five major elements are critical:

  1. Portfolio strategy and products: the products and services your organization provides, and the “where to play” and “how to play” choices you make to best serve your customers
  2. People and culture: the talent—and the talent management—your firm deploys
  3. Processes and systems: the operational processes you adapt to meet purpose-related targets; the ways you ensure that behavior up and down your value chain is in line with your purpose
  4. Performance metrics: the target metrics and incentives you use to measure what you wish to achieve, how your firm is progressing, and the way you create and distribute incentives to make your organization’s purpose tangible
  5. Positionsand engagement: how you align your external positions and affiliations to be consistent with, and consistently deliver on, the purpose your company has defined

These five levers consistently elevate purpose over the long term, but they must be regularly, and rigorously, adjusted over time. Don’t kid yourself; there may be uncomfortable decisions to make, and often hard trade-offs as well. In every case, start by understanding the sources of your company’s strength, and address the areas in which it is vulnerable. Then, build out your purpose infrastructure in a programmatic way.

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