Updated: Feb 9, 2022
Purpose is both a differentiating factor that helps you stand out for the competitors and a must-have when it comes to hiring the best talents- especially (although by no means exclusivly!) when it comes to the younger ones. But that's not all! Here is a list of five reasons why Purpose driven companies are on top.
1. Generate Healthier Profits
There’s plenty of evidence that companies with clarity of purpose outperform the market by a 9:1 ratio over a ten-year period. In other words, meaningful companies driven by a higher company purpose increases profits. Purposeful brands outperform the stock market by 133 percent, gain 46 percent more share of wallet and achieve results that are double those of lower rated brands. The same applies for intangible benefits, such as customer and employee loyalty.
2. Gain a Competitive Edge
Applying Moore’s Law loosely to the speed of change in organizations, Purpose-led transformation will enter our lives a lot quicker than we think—and in such an environment, competitive advantage is execution and speed. Company purpose provides the alignment and clarity across the organization to stay agile, react fast, and move as one organic whole, short-cutting corporate red-tape yet keeping everyone focused on the same objectives.
3. Increase Employee & Customer Loyalty
Think about Harley-Davidson for example. Does Harley build the best bikes? Well, who cares—you buy into the brand, work for the company, or simply enjoy the ride because you belong to something much larger than the rationality of getting from one place to another. Fulfilling dreams of personal freedom pushes a sense of internal and external alignment, drives margins up, increases retention, and makes sure that Harley’s logo is still the second most tattooed symbol on any human body for decades to come.
4. Attract The Best Talent
All parameters being equal (pay, fringe benefits, etc.), the power of company purpose can make all the difference in attracting top talent. Why would a bright millennial graduate choose Google over of a job at a traditional bank? The answer is as striking as it is deep: ‘Why should I help make rich people get richer when I can help organize the world’s information?’ Or in other words, we are witnessing a generation entering the workforce that values a Google-type purpose higher than the pure rationality of monetary compensation and nice perks.
5. Create a Culture of Excellence
Clarity of purpose requires a carefully crafted mix of people, behavior, and vision. Cultivating an internal culture of excellence is what lies at the heart of company purpose, radiating from the inside out. Think about your business as a global village in which every interaction is a pleasant experience. Operating in such a mode builds a culture of excellence based on values and ambition—which in turn is intrinsically linked to the very reason why we exist. Or in the words of Prof. Stefano D’Anna: “Be a king first, then kingdom will come.”
So what is your company purpose? If you can’t articulate your very reason for being in five words or less, it is high time give the answer to this question some serious thought. Having a crystal-clear reason why you exist and how you embedded it within your organization is more than a nice to have. Tomorrow’s know-how is no longer enough. Articulating your very ‘raison d’être’ and anchoring it within your entire value chain is not a question of fluff, but one of whether or not you will be able to thrive in the reality of tomorrow.
Getting Real About Purpose
1. Activate The survey found that 44 percent of respondents indicated that they work at companies that haven’t activated their purpose—meaning, for example, that leaders’ decisions are inconsistent with the company’s purpose, or that the company otherwise isn’t living up to its words.
2. Align with core values ( including your recuitment and appraisal process recruitment) meaning, for example, that they don’t find the company’s purpose to be highly aligned with their own personal values, they don’t see how they contribute to it, or they don’t feel accountable to act in line with it.
Purpose at the core of Strategy
The topics we might cover in a discussion about strategy, purpose, and culture include:
How the company’s strategic framework has evolved and what drove the evolution (e.g., changing customer needs, resources/input constraints, industry dynamics, and global mega trends)
How the company defines “long-term” and why that time frame is most appropriate
How the board contributes to strategy, purpose, and culture and oversees management’s implementation of the agreed plans and policies; how it assures itself that the stated long-term strategy feeds into practices related to budgeting and financing, capital expenditure, and risk management
The strategic milestones against which shareholders should assess performance
Employee involvement, if any, in shaping strategy, purpose, and culture; the feedback mechanisms available; and the incentives provided to ensure implementation
How the board and management assess the compatibility of the company’s culture, purpose, and strategy and, where absent, how it was remedied
How the short-term dynamics in the business feed into the long-term strategy
The short-term pressures on the company, their source, how management deals with them, and how the board provides support to management to maintain a long-term focus
Put Purpose at the Core of Your Strategy. It’s how successful companies redefine their businesses | Harvard Business Review
Why purpose, profit and people are now inseparable | Capgemini
Profit & Purpose. Annual letter to CEOs sent by Larry Fink, the Founder, Chairman and CEO of BlackRock, Inc.2019 | Harvard School for Corporate Governance
The Power Of Purpose: The Business Case For Purpose (All The Data You Were Looking For Pt 1) | Forbes
The Business Case For Purpose | Harvard Business Review
P&G’s Mission To Be a Force for Good and Growth | Deloitte
The Dual-Purpose Playbook. What it takes to do well and do good at the same time. https://hbr.org/2019/03/the-dual-purpose-playbook
How Purpose Impacts Growth (video)
'Bringing Humanity Back to Business': 10 Insights from Paul Polman
Purpose, not platitudes: A personal challenge for top executives
Investment Stewardship's approach to engagement on long-term strategy, purpose, and culture | BlackRock
The role of ESG and purpose