In 2022 I was about to embark on a journey: researching how best to embed purpose within organisations, as part of my Executive MBA at Erasmus University. In this blog, I share some of the insights with a broader audience. This blog was also posted on my personal LinkedIn page.
As part of this research, I conducted literature research, interviewed a number of high level executives (internal employees and external network), and I also did quantitative research internally. The people that participated in this research will remain anonymous. Also, please note that this was a research of short duration, and I am not a PhD student or a University Professor…! But I did believe these findings were worth sharing. Enjoy the reading!
[Note: This is part 1 of the research]
Initial findings
Purpose should be a top priority for organisations
From a brand and reputation perspective, purpose enhances a company's reputation and increases the value of a brand. The Reptrak model, which measures organizational reputation, for instance gives great importance to ‘Character’ drivers such as ‘Citizenship’ and ‘Conduct’. Additionally from a brand perspective, a 12 year study from research firm Kantar showed that brands with a strong purpose grew in value by +175%.
As an EMBA student, I was also interested in the business value of Purpose. After a long search, I was able to find one research paper linking purpose to financial performance (Gartenberg, Serafeim, & Prat, 2019). In this paper the authors showed that high purpose–clarity organizations exhibit higher financial performance (ROA) in the future, particularly when these beliefs are held by midlevel employees. And although there isn't much academic research yet, these findings were promising.
2. Stakeholders expect companies to embrace purpose
Based on the literature research and the interviews I did, I can also say that purpose plays an important role for three key company stakeholders: customers, investors and employees. The illustration below shows some findings, and includes in green some quotes from interviewees.
3. Truly embedding purpose is not easy
Purpose should be more than words, as to avoid purpose-washing. As one interviewee said: “Purpose should never be a lousy promise; because people can't stand it when you say A and do B.” Indeed, embedding purpose was what I was particularly interested in.
In academic literature I found very little on the subject, while the business literature (McKinsey, Harvard Business Review, etc.) did present some models. The models highlight the complexity of such an endeavor. At the same time, they show the potential of focusing on organisational culture.
Definition of purpose
Research findings
In the academic literature, there seem to be two groups of definitions: one group says purpose is simply the mission of an organization; the other says it's the organization's mission which goes beyond profit maximization. Business literature (such as McKinsey or Harvard Business Review) tend to agree with the second definition and refer to ESG. Indeed, some people talk about ESG when they speak of purpose…
I wanted to test these definitions, so I asked people in the interviews to define purpose. What I found is that most of them did seem to agree with the second definition, looking at purpose as the role a company plays in society. One interviewee said: “If there is goodness in your vision and mission, then it goes towards purpose.” But there were still some that didn't agree with this perspective.
Some additional findings worth mentioning are:
There seems to be a difference between companies that have purpose in their roots, and those that tend to create one.
All interviewees agreed that purpose and profit can go hand in hand.
Looking for win-win opportunities is essential to embed purpose into an organization.
Purpose helps motivate and attract employees.
Purpose guides and helps make business decisions.
Own purpose definition
Existing definitions did not reflect the input that was provided during the interviews, so I decided to create my own definition of purpose; which I used in the continuation of this research project.
Purpose is the reason of existence of an organization that goes beyond profit maximization. It articulates their business and highlights the value for their customers. It may include the organisation’s impact on the environment and the communities in which it operates.
Business: The business perspective is clearly a mandatory one, as a purpose is a company's reason for existence. As one interviewee said: “Make sure your purpose is linked to your core competency.” Interestingly, he also said: “The closer your core competence is to the purpose, the easier it is to make a profit.”
Customer: A business cannot survive without its customers, so I also consider this perspective to be mandatory. To some interviewees, this also seemed crucial if purpose and profit were to go hand in hand: “If you can connect your purpose with your customer needs, then you can connect profit with purpose.”
Social and/or Planet: When it came to social and/or environmental perspectives, I found these to be optional. As one interviewee said: “A purpose doesn't have to be social, but it can be.” Indeed, I cannot image all companies putting these perspectives into their 'Why'… it could also be part of their 'How'. Moreover, there seemed to be a clear difference between ‘Purpose by nature’ vs. ‘Purpose by nurture’ - or in other words, between companies that have purpose in their roots and those that do not. This seems to affect the implementation of purpose and a company's credibility. As another interviewee said: “You can't do purpose: either you are or you are not.” Therefore, I believe these two perspectives to be optional; but there may be some that do not agree.
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