Purpose-driven organisations are more efficient, profitable and popular with customers. But unlike more concrete management concepts such as ‘flexible working’, many bosses have trouble defining organisational purpose and knowing how to use it.
Following a two-year project studying the UK’s top executives, the Chartered Management Institute (CMI)’s latest white paper, The What, The Why and The How of Purpose: A guide for leaders has shed light on the topic. The report was written by Charlie Ebert of Judge Business School Cambridge, Dr Victoria Hurth of the University of Plymouth, and Professor Jaideep Prabhu of Judge Business School Cambridge.
The researchers conducted 18 in-depth interviews and a roundtable discussion with leading professionals – including Marks & Spencer’s director of sustainable business, Mike Barry and PwC’s head of reputational strategy Neil Sherlock. CMI evaluated what purpose means at the organisation level and why companies are pursuing it.
What is Purpose?
Researchers defined purpose as “an organisation’s meaningful and enduring reason to exist that aligns with long-term financial performance, provides a clear context for daily decision making, and unifies and motivates relevant stakeholders.”
Purpose directs teams and companies to pursue objectives with a strong intention to serve the wellbeing of others. Applicable to all types of businesses and organisations, the study proposes that purpose is at the heart of an organisation’s strategy and identity.
Five characteristics for spotting a workable purpose are below.
Five Characteristics of Purpose
1. A meaningful reason to exist
More than just selling a product or service, the executive interviews revealed that managers expect their companies to have a meaningful and higher objective. This typically ties in with motivating employees, customers and investors by contributing – directly or indirectly – to defeating societal, economic and environmental challenges in the UK and abroad.
The Body Shop’s success selling all-natural personal care products is underpinned by their higher purpose help 40,000 economically vulnerable people worldwide find sustainable employment and protect 10,000 hectares of forest and woodlands.
2. Purpose forms organisational identity
Purpose is connected to a company’s aims, needs and desires, and helps mould the perception of the business to everyone it interacts with – from marketing to customer service. “It's the essence of who you are. Purpose is the fundamental essence of an organisation,” explained Alison Sharpe, an independent consultant on organisational trust and purpose, (formerly director of corporate affairs at PwC).
Embodying its identity as a fresh and healthy organisation, fruit juice manufacturer Innocent Drinks has incorporated its sustainability purpose into its core business strategy. For example, all its cartons are made from 100% Forest Stewardship Council (FSC) certified card, and the company has incorporated at least 25% recycled content in bottles since 2003.
3. Purpose needs profits (and vice versa)
One of the clearest findings showed most executives strongly believe that purpose and profitability go hand in hand.
“I think it's really, really important that without profit the achievements of purpose are often completely flawed,” said Brendan McCafferty, CEO, Flood Re. Similarly, Laura Turkington, senior manager of Global Innovation and Business Development at Vodafone stated: “We can only create the social impact if it does make profit.”
4. A clear context for daily decision making
Purpose provides a clear guideline on business values and objectives to all stakeholders, while allowing creative freedom for individuals to determine the best course of action in specific scenarios.
“There is a link between purpose and autonomy because if you know where you are going, it’s much easier to be able to be autonomous. I think purpose creates some real clarity and therefore some real agility,” explained John Rosling, CEO, Contexis.
5. Unifying and challenging stakeholders
There have been instances where purpose-driven organisations have made decisions that upset certain stakeholders to protect their purpose. For example, Unilever, adhering to its purpose, ended quarterly reporting to the City and actively managed away its hedge fund investors, whilst Barclays used its purpose to justify ending its tax reduction department, which may have upset some stakeholders.
Watch Video: This is What CMI Companions Say About Purpose
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