The power of purpose - the business case for purpose-driven organisations
In today’s world, the argument for having an organisational purpose beyond pure profit is compelling. The concept of ‘conscious capitalism’ – businesses who think beyond profit to make a positive impact with higher purpose – is a growing global movement, dedicated to elevating humanity through business for the greater good.
This concept has legs, both ethically and financially. Not only do purpose-driven organisations who employ the tenets of conscious capitalism evolve faster, but harnessing meaning in organisations has a positive outcome on performance drivers and business metrics.
So, why do organisations struggle to integrate a purpose-driven philosophy into their business strategy? Often, it’s because organisations do not understand the benefits of this approach and eliciting support can be challenging.
This article provides powerful data on why meaning matters – for businesses, their employees, and our society at large. We hope this business case helps you and your leaders to take this concept seriously.
The three types of purpose – direct, societal, and aspirational
A Harvard Business Review research paper defines purpose as “an aspirational reason for being which inspires and provides a call to action for an organisation and its partners and stakeholders, and provides a benefit to local and global society.”
So, let’s break this down.
To best explain the levels of purpose let’s look at a simple example. Let’s take a hardware company. Their direct purpose is to sell quality hardware equipment. On a deeper level, their societal purpose could be to support people to build infrastructure that helps individuals and communities, elevating society. If we go one step further, their aspirational purpose could be to positively impact the world by contributing to causes larger than themselves. For instance, they could build houses in disadvantaged communities for free, or donate building materials for use in third-world countries. This is an example of conscious capitalism at work.
When an organisation truly embraces purpose on all levels, it drives a cultural transformation. But to do this, organisations require a level of maturity and self-awareness that can be hard to achieve. That’s why 79% of business leaders surveyed by PricewaterhouseCoopers believe that an organisation’s purpose is fundamental to business success, yet only 68% use purpose as part of their leadership decision-making processes.
Other research has cited that 90% of executives understand the importance of purpose, but only 46% use it to inform their strategic and operational decision-making.
Why is this so? External issues, short-term pressures from investors, lack of performance targets and incentives aligned with purpose, insufficient leadership commitment, and poor communication from the top, are cited reasons for overlooking purpose as a business strategy.
Why purpose is critical for all organisations
So, here’s the rub. Purpose not only transforms organisations from the inside out, but research indicates that a strong purpose-driven culture can help organisations to grow, innovate, and transform. Here’s 3 powerful reasons why purpose matters.
Reason 1: The financials stack up
There is now recent evidence to show that organisations who clearly articulate their purpose enjoy higher growth rates, profitability, and levels of success in transformation and innovation initiatives. With 2 in 3 consumers willing to pay more for products and services from brands that are committed to making a positive social impact, the proof is in the pudding.
Furthermore, those organisations who clearly articulate and prioritise their purpose experienced growth of 10% or more over the past 3 years, over those who did not. In addition, performance-driven organisations outperformed their competitors across a range of performance metrics including expanding geographically, acquisition/merger partnerships, managing top leadership changes, and successful new product launches.
Reason 2: Changing consumer expectations
Consumers expect more from their organisations today. They expect them to act in accordance with their values and will boycott organisations who do not.
The latest consumer data illustrates this trend with customers perceiving purpose-driven brands as being more caring, and are more loyal as a result. Furthermore, research shows that millennials who have a strong connection to the purpose of a business are 5.3 times for likely to stay.
By appealing to a consumer’s values-set, organisations can develop deep, and highly engaged advocates for their brand, creating greater share-of-wallet, and long-term financial advantages. To back this up, research shows that 33% of people would actively buy more goods or services from a brand they already purchase from, if that brand took a stance on a controversial issue that aligned with their beliefs.
Reason 3: Attracting and retaining talent
Purpose-driven organisations instil employees with a greater sense of satisfaction in their work, emanating from a shared sense of purpose. As a result, purpose-driven organisations have greater employee tenure, strong staff satisfaction and engagement, and increased employee productivity. In short, an organisation who can effectively articulate their purpose can create a robust brand that will attract and retain talent long-term.
Moreover, potential exists for organisations to help employees reframe their roles by conveying how their contribution aligns with the organisation’s overarching purpose. Not only does this provide greater meaning to their daily work, but it also increases the purpose and satisfaction in their life more generally.
The big question to ask…
These quotes really sum things up.
“Profit is not the purpose of a business, rather the test of its validity.” Peter Drucker
“Purpose doesn’t make decisions easy; it makes them clear.” Roy Spence
“Without a clear purpose, you’re making choices in a vacuum.” Garry Coffer
“The business of business is improving the state of the world.” Marc Benioff
So, the question is what’s your organisation’s purpose that transcends your products/services and bottom-line? Can you articulate it, and does it stand the test of time? If you’re struggling with this question, you’re not alone. Don’t give up – now’s the time to start the journey, not only for your organisation, but for your customers, employees, and society at large.