Unlocking the potential of purpose
True corporate purpose is not a cosmetic branding exercise or marketing campaign but a commitment to understanding why you are in business
Tim Steigert is excited. The leader, digital and innovation strategy at GE Europe has just been asked about a speech he gave on purpose at a conference.
‘I honestly believe that it is the ONLY element that will allow corporations to attract people with a post-consumerism mindset to come work for them. There is a massive shift in society but the ripples it is sending are so small: 99.9 per cent of people aren’t realising it. And those that do are frustrated, looking for answers and ways out.
‘It isn’t that these people aren’t willing to work really, really hard – just not at the terms that are currently in effect in large corporations. The thing is purpose unlocks it all. Flow stems from it. Resilience is built on it. And you can reach unfathomable potential once you tap into it, and albeit that sounds esoteric… there is some really interesting neuroscience behind it.’
Purpose. It is hard to define. But for evangelists like Steigert, purpose is the only way forward for business. A chance to mend bridges with society. He is not alone. Across industry sectors, business leaders are waking up to the power of purpose.
‘Conversations about purpose have multiplied something like five-fold over the past few years,’ says John Rudaizky, partner, global branding and marketing lead at EY. ‘The conversation is out there, and I think increasingly smart business leaders are galvanising their businesses around purpose.’
‘We need to differentiate between vision, mission and purpose,’ explains John Drummond, chairman of Corporate Culture. ‘The old fashioned model was based on vision, which starts with ‘where’. It is a clear articulation of our preferred future, but without a time frame. Mission is about what we do. It is a clear articulation about the products and services we produce. But purpose is different. It answers the question about why we are in business. It defines a reason for being. It helps provide focus for a business strategy. Purpose usually leads to a compelling narrative for an organisation.’
Tim Baxter, director of communications at Allen & Overy, agrees. ‘Purpose is a reason to exist. It is more useful than vision and more differentiating than a mission. It is about the impact you have that is specific to you. Purpose is different, actionable, real and people understand what it is that you are talking about. And it influences decision making.’
We need to differentiate between vision, mission and purpose… purpose is different. It answers the question about why we are in business. It defines a reason for being
Charlotte West, marketplace director at Business in the Community, says: ‘For many years, purpose was a hot topic in marketing and branding agencies, with expert agencies offering their ‘purpose services’. But it was just a cosmetic exercise. It was a branding and image exercise that fooled no one.
‘We describe purpose as why your business exists. It is a North Star that guides commercial strategies and behaviours and, crucially, it can also capture any bold changes that the business wants to embrace. A purposeful company is purpose-driven. It places consumer quality of life and the well-being of society at the heart of what it chooses to sell or how it chooses to behave. It is the core of the business.
‘It influences decisions on what markets you choose to enter. It leads to new innovations as it helps brands to connect with their customers. It unlocks opportunities. But it means companies are no longer focused on short-term profits. They are keeping their eye on the longer time prize, which is tough because we live in a world of short-term decisions with investors breathing down companies’ necks.’
The need to think long-term
The first action Paul Polman did when he joined Unilever as chief executive in January 2009 was to announce that the company would abandon quarterly reporting and concentrate on a longer term view. ‘I figured I couldn’t be fired on my first day,’ he later said. But the statement also marked a change in the investor relations strategy of Unilever. The company sought shareholders who shared their vision for long-term investment, and ‘disinvited’, as Polman put it, short-termist, speculative style investors from its register. The financial crisis, he has argued, was due to short-term investors.
Polman’s logic was sound. If companies are driven by short-term investors, they make short-term decisions. They cut back on R&D, training or IT budgets to make quarterly figures, or pay out dividends to affirm their attractiveness as an investment, while depleting funds for capital investment.
A short-term term focus does not allow us to solve big problems. Our goal is to produce as much value for the world as possible. Period. Purpose is the point. Profit the result. It is the order of things
It is a view that is gaining ground with investors. Last year Larry Fink, chief executive of BlackRock, the world’s largest institutional investor, wrote to the chief executives at S&P 500 companies and large European corporations asking them to ‘lay out a strategic framework for long-term value creation’. As he put it: ‘Today’s culture of quarterly earnings hysteria is totally contrary to the long-term approach we need.’
But while Fink is focusing on the dichotomy of investing in short-term strategy while needing to generate long-term growth to satisfy clients saving for their retirement, Polman was also focusing on the long-term to solve problems, chief amongst them was how to generate growth from the previously lacklustre Unilever.
As Astro Teller, director at Google X laboratories, where projects include Google Glass and driverless cars, puts it: ‘If someone gives you a day and tells you to go to the moon, your only option is to build a ladder. A short-term term focus does not allow us to solve big problems. Our goal is to produce as much value for the world as possible. Period. Purpose is the point. Profit the result. It is the order of things. Greater value creation leads to more profit than trying to maximise profit as the end game.’
Is it all being driven by millennials?
Almost nine out of ten (87 per cent) millennials say they believe their company’s success story should be measured on more than financial performance, according to the Deloitte Millennial Survey, while researchers at investment bank Morgan Stanley found that millennials are three times more likely to seek employment with a company because of its social and environmental stance. They have a powerful voice. They represent an increasing proportion of the workforce – the average age of workers within professional services group EY is 28 – and soon will outnumber other generations.
But it is more than that. Across the generational spectrum, people feel disenfranchised. The gap between the rich and poor is getting wider. The world’s eight richest individuals have as much wealth as the 3.6 billion who make up the poorest half of the world, according to Oxfam. The vote for Brexit has been seen as a demonstration that the UK has divided into the ‘haves’ and ‘have nots’.
The rift has been particularly evident since the financial crisis, an event driven by the short-termist view of capitalism. It exposed the flaws of capitalism: companies forgot the consequences of their actions. They sought profit at the expense of society as a whole. They worried about shareholders rather than other stakeholders, including their own people. Consequently, the contract between business and employee has, in many cases, broken down. Jobs for life are no longer seen as a given. Loyalty is not often rewarded.
Historically, during periods of instability, people come round to the view that they must find stability from within, rather than from an employer. In effect, they are looking for purpose.
The Japanese have a word, ikagai, it is their personal reason for being. It is why they get up in the morning. Personal purpose leads directly to mental and physical well-being
It is not just the millennials who feel this way. Six years ago, Tim Judge, then a professor at the University of Florida, reviewed 120 years of research, synthesising the findings from 92 quantitative studies, covering more than 15,000 individuals, to discover that the association between salary and job satisfaction is extremely weak.
Companies who solely focus on financial rewards are, it seems, missing other motivational tools, such as purpose, passion, transparency and meaningful work.
This view was borne out by a recent report by Deloitte, Global Human Capital Trends, that said: ‘Organisations that create a culture defined by meaningful work, deep employee engagement, job and organisational fit, and strong leadership are outperforming their peers and will beat their competition in attracting top talent.’
‘Are millennials driving the debate on purpose?’ asks Rudaizky. ‘They are fuel for it. They are a critical factor in our thinking: if we want the best talent we have got to make sure we appeal to them. But ultimately ‘purpose speaks to all people. It has a galvanising effect’.
Corporate Culture’s Drummond adds: ‘Purpose personalises everything. It makes it about the people. Too often, businesses fail because they don’t focus on people. I have a strong interest in behavioural change. The Japanese have a word, ikagai, it is their personal reason for being. It is why they get up in the morning. Personal purpose leads directly to mental and physical well-being.’
‘It is imperative that business gets more connected to society, and is seen as being so,’ says West.
It is not easy
‘A good purpose should be relevant to how you make your money,’ explains West. ‘It should be about the world outside. It has got to motivate people, and focus on the bigger picture. Maximising profits for shareholders does not excite people. Improving lives. Enabling education. Delivering well being. You’ve got to excite people internally and externally. If you repackage what you currently do, you’re missing the point. It has to be relevant and bold. It has got to tackle risk issues. It has to be seen as relevant to government, media and the public.’
The EY Beacon Institute was founded by the professional services firm to help ‘fellow travellers’ on their road to becoming purpose-driven organisations, says director Valerie Keller. ‘We are seeing leaders who are thinking about undertaking transformation, but it is just one more thing on their agenda, and quite often executives have too much going on.’
Under the auspices of the Beacon Institute, Keller can start to prod, asking questions. What is the company’s reason for existence? What inspires a call for action? What is it that the company already does? She has to assuage concerns that establishing a purpose creates disruption. ‘Change is constant,’ she explains. ‘Transformation is simply applying a strategic lens. It is a way to de-risk an organisation and accelerate growth. It is often a solution to problems that organisations already have: retaining talent, engaging customers, the regulatory environment, maintaining trust.’
She adds: ‘The biggest global challenge is providing enough work for people. Technology is disrupting the workplace. It is taking jobs out of business and the economy. ‘Companies are saying I need to transform. Technology is driving me to do that. What does that bring up for me? Potentially, some hard decisions. But this could be the time to take advantage of the challenges to develop your purpose.’
Some leaders may worry that putting their head above the parapet might expose them to undue scrutiny. But Keller believes that they are already being scrutinised through social media, inquisitive stakeholders and regulators, say. ‘There is an army of people on social media who can own your brand if they find you’re one of the bad guys.’
For some, this has meant a reappraisal of their story. ‘We are seeing businesses going back to their roots,’ says Keller.
Drummond agrees: ‘I think purpose statements provide a reality check.’ Organisations looking to develop their purpose statement for the 21st century often rediscover what it was that they were originally set up to do. ‘They return to their start up story’, unlocking the vigour and passion that a start up possesses in its early days.
When Polman unveiled Unilever’s new purpose, back in 2010, it was, in effect, the modern day equivalent of the vision set out by its 19th century founder to ‘make cleanliness commonplace’.
Today, Unilever wants to ‘make sustainable living commonplace’. To bring that purpose to life, Unilever introduced its Sustainable Living Plan which Polman has described as ‘a blueprint for the company’s sustainable growth strategy that spells out how the company’s success is ultimately tied up with the success of societies and the planet’.
The Sustainable Living Plan has three main goals – each to be achieved by 2020. It wants to improve the health and wellbeing of more than one billion people, reduce the company’s environmental impact by half, and improve the economic livelihoods of millions of women and smallholder farmers in its supply chain.
But Unilever is only the sum of all its brands, which range from Ben & Jerry’s to Dove and Vaseline, so the company has worked with each one to help them identify and activate their long-term sustainable living purpose.
Domestos, a toilet cleaner sold in 35 countries, has a social purpose to enhance people’s health and well-being by reducing open defecation and improving sanitation. But 2.4 billion people worldwide lack access to a proper toilet. As part of its commitment, in 2014 Domestos founded the Toilet Board Coalition, a business platform that connects large and small companies, and encourages collaboration between the private, public and non-profit sectors, with a simple goal: sanitation for all. It is a virtuous circle for Unilever: building more toilets potentially generates more Domestos’ sales.
It starts from the top. Unilever is lucky. In Paul Polman, it has a chief executive that believes in and is driving the purpose agenda. He is not a lone voice. Across the business world, chief executives are standing up and declaring their support for purpose.
The tone is set from the top, but it needs to be owned and lived by the people. It is necessary but not sufficient for this to be a Board initiative
Indra Nooyi, chief executive of PepsiCo, introduced Performance with Purpose in 2006, reflecting her ‘fundamental belief that in the 21st century, a good company must also a good citizen’. Under her leadership, the company has moved part of its focus to healthier foods, healthier products, healthier drinks. ‘Sustainability is not something to support with the profits we make, but rather a path to delivering profitability,’ Nooyi wrote last year.
Within one month of becoming chief executive at Procter & Gamble, Robert McDonald elevated the company’s purpose – improving the lives of the world’s consumers – into a business strategy: improving more lives in more places more completely.
‘This absolutely has to come from the top,’ says Allen & Overy’s Baxter. ‘It has to have the imprint of the Board.’
Keller agrees, but adds: ‘The tone is set from the top, but it needs to be owned and lived by the people. It is necessary but not sufficient for this to be a Board initiative. It’s about the boots on the ground. But people have targets to meet, and mostly these are set by financial metrics. Unless these are recalibrated, there is no incentive to change. It goes back to the metrics: they need to be aligned to purposeful behaviour.’
In many cases, but not all, it takes the appointment of a new chief executive to define and articulate a company’s purpose, as they seek a business strategy to elevate growth. ‘Our new chief executive [Frans van Houten] came in in 2011, and wanted to drive purpose and unity. It led to our rebranding in 2013, our innovation strategy [Accelerate!, which is designed to drive entrepreneurship, operational expertise and raise the level of competitiveness across the company] and our sustainability initiatives,’ says Ed Walsh, senior vice president, global integrated communications at Philips. ‘Investors welcomed the focus that it brought to our business.’
The company, which last year spun off its lighting operations Royal Philips, is now refocused as a health technology company, with a stated goal to improve three billion lives by 2025. ‘It is about how we are trying to answer the biggest societal issues of our time,’ he adds. ‘We have made bold statements. We are champions of the circular economy; we have committed to becoming carbon neutral by 2020 and recently launched our five-year sustainability plan.’ Over the past five years, Philips’ brand value has steadily increased: today it is the most valuable brand in the history of the Netherlands.
Brendan May, chairman of Robertsbridge, believes companies have a choice. Embrace a new purpose and a drive for sustainable growth, or don’t. ‘I liken it to the difference between Rick Astley and U2, who have enjoyed a 40 year career,’ he explains. ‘You can get lucky and have a one off number one, or you can create a sustainable business.’