Tim Steigert is excited. The leader, digital and innovation strategy at GE Europe has 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.’
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.
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 thing. 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 really 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.
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 purposedriven 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.’
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.
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.’
Case study: How EY seeks to build a better working world
Mark Weinberger was appointed global chairman and chief executive of
EY in 2013, his first act was to launch Vision 2020, an ambitious
plan to establish the professional services as the global leader in
its sector. And at the heart of that plan was a purpose for the
business: a ‘North Star’, as he put it, that acted a fixed point
to help EY navigate any future change and uncertainties.
He articulated EY’s new purpose as Build a better working world, an ambition that resonated with 230,000 employees around the globe because it was, in effect, what they had already been doing. But the new purpose galvanised employees, making them rethink how they performed their roles. And it also made them feel that their work made a difference to the purpose, so they worked even harder: it became a circular story.
‘There’s been a purpose driven transformation of our business,’ explains Valerie Keller, global head of the EY Beacon Institute. ‘It’s about what do we stand for, what do we exist to do, and why do we do it. You can grow for the sake of growth, or you can grow to build a better world.’
John Rudaizky, partner, global branding and marketing lead at EY, is quite clear. This is not a branding exercise. This is a business strategy. ‘From our point of view, at a high level, purpose for us is about how do we put confidence into capital markets. How do we help solve some of the world’s toughest issues.
‘If you think about the initiatives we have around purpose, they start from the inside. We launched Better begins with you, one of the biggest internal awards programme for our people, where we ask how they have built a better working world. We receive more than 5,000 entries.’
There are four categories – strengthening our community; driving exceptional client service; developing outstanding leaders and teams; and pursuing innovation – and colleagues nominate individuals or teams. Each winner receives $250,000 to further develop their ideas. Last year’s winners included a German team who brought together businesses, government bodies and social groups to help refugees integrate with a workforce and rebuild their lives, and an US-based tax officer who created an efficient and reliable reporting tool.
Rudaizky continues: ‘We have our Women fast forward programme that considers how we can help accelerate women in the boardroom. Numerous studies have shown that the more women there are in the boardroom, the better the performance. And on the back of the Olympics, we set up the Winning women athletics network; we found women who played sports competitively ended up doing very well in business, yet leaving the sporting world and going into business is tricky. Our mentoring programme helps take athletes into EY and mentor them into the business world.’
Marketer Rudaizky was recruited to help launch EY’s purpose and to share its meaning with its people. ‘Having a white space challenge is an interesting one. How can you unlock Building a better world and make it meaningful to each individual? How do you articulate that? We developed a number of assets and built a campaign around asking better questions. The better the question, the better the answer.
'Every question we answer, whether that is simply conducting a successful audit, that is our impact in the positive working world. Every individual can come to work to ask a question and solve it and move the working world forward. The world is full of complex issues, but through history the world has moved forward by people asking provocative questions.’
He adds: ‘Ultimately as great consultants, we want to reframe questions in a way that gets people thinking in new and fresh ways. So this also speaks to our people and partners. It is what they do. As we have shared this across our organisation, we are unlocking our purpose and we have seen very strong results. Our internal engagement scores have gone up. Our growth rate has gone up.’
But EY has also shared its purpose journey with its clients. For the past few years, it has convened discussions at the World Economic Forum in Davos for business leaders on the subject of purpose. ‘If we see this as the secret of our transformation, how do we service our clients?’ asks Keller. EY believes its role is about more than just helping clients rethink products or capabilities, but instead about starting them on their journey.
‘What can we give away to help other organisations on their journey?’ she asks. ‘Other people are thinking about this. We are all faced with the changing expectations of our stakeholders. The business of business is business, and the business of business is to make money for its shareholders, but that’s a short-term gain. We need to think long-term.’
Consequently, EY has launched the Beacon Institute. Its name has a meaning: it is leading companies on their journey to redefine a successful business in the 21st century. ‘We needed a place where leaders could come together and exchange best practice, where we could offer tools and roadmaps for their journeys, where we’re a fellow traveller.’
Those business leaders who are thinking about undertaking such a transformation are
asked a handful of questions, such as what is your business’ reason for existence? What inspires a call to action? What is it that you already do?
‘Change is constant. Transformation is simply a strategic lens, which looks for solutions to problems the businesses already have, such as retaining talent, engaging customers, the regulatory environment and the need to build trust,’ says Keller.
Not every business leader will automatically come on board. ‘It’s a generational piece; they have grown up with a certain construct of what it means to be in business,’ she explains. ‘And are we talking about purpose with a small p or a big P. If their idea of purpose, with a small p, is around profit in the short-term, then that’s okay. But if they are looking at purpose with a big P then they might need to understand the business case for that.
‘Bigger visions lead to bigger expectations, and they might not quite be ready for that. Having a purpose with a big P means you are held to a higher standard, which brings more risk, and businesses try to avoid risk. We have to show them that they already have risk, but they just don’t recognise it. They need to connect in a different way.’
IS THERE A BUSINESS CASE FOR PURPOSE?
Companies that have embraced a core purpose consistently report greater levels of employee engagement, customer advocacy and improved growth rates. Some report anecdotal evidence - staff feel more motivated and enthused – but Unilever is one of the few companies that has publicly reported tangible results.
It has developed a four point framework to capture the way that its Sustainable Living Plan contributes to its success.
Each point is business focused, and progress was last reported in May 2016, when the company offered the following insights:
1) DRIVING GROWTH
Sustainability deepens brand equity, drives sales and inspires innovation. Combined, sustainable living brands delivered nearly half Unilever’s growth in 2015. They are growing 30 per cent faster than the rest of the business, and the pace is accelerating.
2) LOWERING COST
Cutting waste and reducing the use of energy, raw materials and natural resources creates efficiencies and cuts costs. Unilever has reduced costs by more than €600 million through eco efficiency measures in its factories since 2008. Its waste programme has contributed to around €250 million of cost benefits in that time.
3) REDUCING RISK
The launch of the UN’s Sustainable Development Goals and the Paris Agreement on climate change has focused business and investor attention away from short-term risks to the wider risk environment. Sustainability helps mitigate risk. Sourcing more agricultural products sustainably helps to future proof the supply chain.
4) BUILDING TRUST
Trust strengthens relationships with everyone Unilever deals with. In 2015, Unilever maintained its status as the Graduate Employer of Choice in the fast moving consumer goods sector across 34 countries and was named one of the top three most sought after employers on LinkedIn.