The Power of Purpose

Purpose is high on leaders' agenda, but still many firms use it in a shallow way. They craft a beautiful statement but don’t fully embed it into the employees’ beliefs and behaviors. The result: they fail to realize their purpose and can’t harvest the full benefits of a purpose-led organization.

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Why It Matters

After the famous TED talk of Simon Sinek about «Start with why» to inspire action, «purpose» got another boost in attention for management. But it’s more than a fad:

1. Purpose performs

Research shows, that purpose-led organizations perform better, e.g. a study of BCG shows that companies with a truly embedded purpose in their organization generate twice the total shareholder return compared to its peers. It claims, that if purpose is seen as a tool for business performance, it enables the organization to do good and drives business results at the same time; which in return enables to do even more good and puts a virtuous circle in motion.

2. Purpose guides in times of transformation

In times of constant change it is harder to define yourself around what you do rather than around a common, timeless belief of why the organization exists. Purpose can be the guiding star that helps unite people, give meaning, motivation and alignment in times of transformation. If for example, an industrial manufacturer wants to transform itself into a solutions provider, employees can circle around the overall ambition of the the firm and the reasons why the shift is needed; rather than focussing on the aspects and parts of the organization that will disappear or not be relevant anymore in the near future (e.g. certain products).

3. Purpose gives meaning

Simon Sinek nailed it: «people don’t buy what you do, the buy why you do it». In times of abundance of almost every material good, consumers are seeking for meaning and connect and interact with organizations that share their convictions. AirBnB is not claiming to be an online platform to rent apartments; they «imagine a world where you can belong anywhere». A purpose to which one can connect and which offers the company the possibility to credibly market a multitude of further services which help to realize the ambition (e.g. real experiences with locals you can book already today).

What Is It

But what exactly is purpose? Different than mission (the «what») or vision (the «where») or strategy (the «how to get there») purpose is the organization’s «why». It combines two fundamental questions:

  1. Who are we? (what are our authentic and distinctive strengths?)

  2. What do we contribute to society? (why do we exist beyond what we make, do, or sell?)

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Answering the first question, you capture what your organization is about at its best — meaning it is aspirational and defines what you can be and not only what you stand for, what brand positioning typically answers. Rather than being mainly market driven, a purpose-led organization also cares about it’s values and culture. It changes the perspective on how the organization is looking at the world; meaning that related topics like e.g. social impact are becoming an opportunity and not only an obligation. The purpose-led organization would assume that if it disappeared tomorrow, the world would lose something meaningful.

How to Do It Right

In many consulting projects where it was a matter of developing a strong purpose, we had similar experiences. The energy that a clear, authentic and emotional purpose can trigger is inspiring and opens management’s perspective on the company, its services and its own leadership.

At the same time, this is also the risk. Many companies start with the internal communication of the purpose, maybe do some engagement sessions and then the organization tends to return to daily business. If purpose is understood as a communicative measure, as in this case, it will never be able to unfold its full power.

If the purpose is to be implemented comprehensively, far-reaching changes are necessary. From the basic attitude to business, the communication focus to culture, the offer and the customer experience. For example, if an insurance company wants to have more relevance in people’s lives, it needs a new story for its customers (emotional and people-oriented), new services or new aspects in its culture (e.g. error culture and innovation) that need to be incorporated.

It is therefore crucial for success to consciously launch initiatives that bring the company closer to its purpose and show employees that management is serious and not just talking about it.

In addition, expectations should be well managed to prevent sarcasm («management has time to define a nice purpose statement and I have to deliver revenue in my business unit») and quickly create a visible sense of achievement (small or large).

Agile approaches in which the path is taken by means of small prototypes have quickly proved to be more effective than large «roll-out programs». The focus can also be quickly adjusted and employees are involved and part of the transformation and not just recipients of a «new change initiative». This is the way to a constant transformation, the search for the best version of one’s enterprise and the ambition to fulfil one’s own purpose.

With that in mind, purpose can have the power to transform.

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