The Power of Purpose

The Power of Purpose

The word ‘purpose’ is increasingly been working its way into the business vocabulary. Making money is key to surviving and thriving and creating shareholder value. Once only used in the context of individuals finding meaning in their lives. So why all the attention in the enterprise? What is the purpose of ‘purpose’ in business?

Purpose is all about “why.” Your purpose defined why your company exists beyond making a profit. It articulates the difference that you are trying to make in the lives of your customers. Companies are expanding their concept of purpose to consider not just the impact on their customers and shareholders, but the impact they have on their employees, communities, and the world at large.

The Business Roundtable, an association of CEOs of leading companies in the country, just updated their Statement on the Purpose of the Corporation recognizing the commitment of companies to benefit all stakeholders – customers, employees, suppliers, communities as well as shareholders.

Purpose Matters

According to PWC survey 79% of business leaders believe that purpose is central to business success and to an organization’s existence.[i] Deloitte’s 2014 Core Beliefs and Purpose Survey results showed that respondents from companies with a strong sense of purpose are more likely to say their organizations recorded positive growth and outgrew their competitors, and also are more optimistic about their organizations’ prospects.[ii]

Purpose influences every aspect of your business. It determines not just what you do, but how you grow your business. It impacts your relationship with all your stakeholders.

  • Customers: Thanks to advances in digital technologies, we live in a world of increased transparency. Amongst the many changes, this has brought a change in the expectations of customers. According to PWC’s 19th Annual Global CEO Survey, companies are experiencing this shift in expectations in the way that customers look beyond features and benefits in their purchase decisions, to consider the company’s impact on the broader world.[iii] A study by Harvard Business Review found that the benefits of a strong sense of collective purpose helps to increase customer loyalty (80%)[iv].
  • Employees: We all want to know that our work makes a positive difference – for our company and the world. Your organization’s purpose gives meaning to your employees – a reason to get up in the morning. Younger generations expect more from the companies they work for – they expect companies to contribute to help society, not just make a profit. Purpose enables you to attract and retain talent. It unifies employees across the organization to work towards a common goal. Harvard Business Review research found that a strong sense of collective purpose contributes to employee satisfaction and enhances an organization’s ability to innovate and transform.[v]
  • .Society: As society struggles to keep up with the changes that technologies are having in our lives, there is a higher expectation that companies have a responsibility to address both the intended and unintended consequences of those technologies. Investors help determine who the winners are through their decisions about where to invest wealth. Competing for capital will require a commitment to benefiting society.
  • Shareholders: Does purpose make a difference in results? You bet! Research by BCG/BrightHouse found that companies with high purpose scores enjoyed higher-than-average ten-year total shareholder return (TSR).  Investors are taking heed.  Larry Fink’s 2019 letter to CEOs emphasizes BlackRock’s commitment to purpose and his expectations of portfolio companies to focus on purpose.

Activating Your Purpose

While there is growing recognition of the importance of purpose, only 46% of the executives in the recent HBR survey said their company had a strong sense of purpose.[vi] Having a bold purpose is just the beginning. Having a great purpose is no guarantee of success. Once defined, the purpose must be communicated, activated and integrated into every aspect of the business – from strategy to decision making, to on-boarding, recognition and performance management. It must become a constant North Star to guide the organization. Yet, PWC research found that only 34% of business leaders agree that purpose is a guidepost for leadership decision-making.[vii]

Ultimately, it is actions, not words that demonstrate the power of purpose. Is your organization fully leveraging the power of purpose to drive results?

Download the Business Roundtable Statement on the Purpose of a Corporation here.

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[i] Putting Purpose to Work: A study of purpose in the workplace

[ii] Deloitte, “Culture of Purpose – Building business confidence; driving growth. 2014 Core Beliefs & Culture Survey”, pages 5 and 6

[iii] PWC, “19th Annual Global CEO Survey”, 2016, pg14

[iv] Harvard Business, “The Business Case for Purpose”, Analytic Services Report, sponsored by EY

[v] Ibid

[vi] Ibid

[vii]  Putting Purpose to Work: A study of purpose in the workplace

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