The “goal” is in fashion. In the past two weeks alone, leading business journals including McKinsey Quarterly, [email protected] and strategy+business have highlighted the importance of business purpose. If you’re a business owner, it’s clear that you need to think about the purpose of your business more than ever. But having a purpose statement doesn’t automatically translate to leading an organization in a purposeful way — and your purpose may be useless if you don’t:
- Use a single overall objective
- To assure stakeholders buy in
- Enforce strategies to operationalize it
Why is purpose so important now
The goal had probably already caught your eye before Covid-19 hit. Last year, BlackRock CEO Larry Fink stirred the pot with his 2019 annual report letter on corporate governance. He said: “The importance of serving stakeholders and adopting a purpose is becoming increasingly central to how companies understand their role in society. Then Business Roundtable released a new “Statement on the object of a companysigned by nearly 200 CEOs who are committed to leading their companies for the benefit of all stakeholders – customers, employees, suppliers, communities and shareholders.
You are now facing business interruptions caused by the combination of a global pandemic, civil unrest and an economic slump. You are forced to rethink the relevance of your business to society and the value it creates. What is “essential” in your business? Are you doing work that really matters? How do you help people, communities and the world heal from all pain and suffering?
Plus, you’re probably struggling to engage employees. Like before reported, only 36% of employees are currently engaged and 14% are actively disengaged, meaning they “have miserable work experiences and take their displeasure to their co-workers.” This historic low in employee engagement is not surprising. In this new era of workplace safety concerns, new operations, and virtual work, how are you supposed to keep employees unified, focused, and motivated?
And these days, companies are held to higher standards by the media and the general public. In recent years, with increasing access to tools that allow people to sneak behind corporate curtains, executives have come under increasing criticism for the way they run their businesses. At the height of the coronavirus pandemic, news focused on if and how companies were offering community assistance. Now, with a focus on racial equity, businesses are compelled to address racism and operate with authentic diversity and inclusion. If you’re like most other leaders, now you need to prioritize sustainable value creation and serve the interests of all stakeholders, not just investors.
So there’s more reason than ever to make sure you’ve formulated a goal that’s valuable, inspiring, and relevant to your organization. But just talking about purpose without stepping on it is, at best, hypocritical. Alan Jope, CEO of Unilever Explain this well when he observed, “Purpose is one of the most exciting opportunities I have seen for this industry in my 35 years of marketing. Done right, done responsibly, it will help us restore trust in our industry, unleash greater creativity in our work, and grow the brands we love. However… the woke wash is starting to infect our industry.
At worst, a disconnect between what you say is your goal and how you actually run your business exposes you and your organization to risk and potential crisis. Just ask the folks at Facebook, who say its goal is to bring the world together, but has been boycotted by advertisers for allowing hate and vitriol to spread on its site.
Here are three requirements to make sure your organization’s purpose really makes a difference.
1. Single objective
Use a single overall goal for stakeholders and functions.
If your organization is like most others, you probably have a corporate mission or purpose statement that describes the scope of your business – what your organization does, produces or sells – and perhaps sets a goal for achieve certain business performance goals. For example, a typical mission statement might read: “To create shareholder value by delivering products and solutions in an innovative and cost-effective manner. »
Separately, your company probably expresses a purpose or essence for your brand that describes what you want your brand to be known for. For example, the same company’s brand strategy may state that it wants its brand to be synonymous with safety and reliability. Both statements describe valid aspirations, but they seem to have nothing to do with each other.
When you use multiple statements like this, you leave it up to employees to determine which one to follow. In one HBR article Professors at the Kellogg School of Management observe, “Why are we here?
Additionally, contradictory or diffuse statements destroy any opportunity for you to build customer trust and brand authenticity. Unilever’s Jope observed“There are too many examples of brands undermining target marketing by running campaigns that don’t back up what their brand says with what their brand does.”
Your purpose as a business, brand, employer, investment, corporate citizen, etc. must be articulated as a single overall objective. If you think about it, the interests of all groups in your business ecosystem are interdependent, so your goal should address them as a whole. If you rationalize and synthesize your intentions into one overarching goal, you give your goal the potential to unify, align, and engage everyone.
2. Stakeholder buy-in
To fuel your goal, make sure key stakeholder groups — especially customers, employees, board members — embrace and sign off on it.
It is not necessary or even appropriate to “test” your purpose with customers as it should flow from the aspirations and vision of the company’s leaders. But you need to make sure your goal is based on a thorough understanding of your customers’ needs, wants, and expectations. And if and when you share your goal with customers, they should find it strongly compelling and resonant. The best way to ensure customers buy into your goal is to focus on them, put them clearly at the forefront, and reference how the organization benefits them. It may seem obvious but in a investigation of nearly 2,000 CEO descriptions of their organization’s purpose, more than half of respondents failed to mention who the company was meant to serve or help.
It is also not advisable to test your goal with employees, but you should increase the likelihood that employees will adopt it by connecting it to their daily work. It starts with clarifying the purpose of the value your business creates and for whom, then making sure you show how employees enable the organization to create that value. Without connecting the dots, you leave employees guessing what your organization is trying to accomplish and how their work supports those goals. At best, your employees will become unmotivated and disengaged; at worst, their confusion or improvisation leads them to work at cross purposes.
Your board members, on the other hand, should be engaged in verifying your goal, if not developing it. The CEO’s tenure only lasts about five years on average, while the tenure of board members is more than twice as long (according to harvard business review and CGLytics respectively), so that boards not only have a more longitudinal perspective and power, but also a fiduciary responsibility to care for their company’s purpose and the organization’s ability to achieve it.
In addition, strategy + business reports that boards are now explicitly called upon by powerful asset managers to enforce accountability on issues such as purpose. During the 2020 proxy voting season, some of the biggest asset managers introduced a new set of metrics to report on non-financial performance.
Right now, it doesn’t seem like many of your peers understand the importance of board membership on purpose. According to a To analyse published in the Harvard Law School Forum on Corporate Governance, the vast majority of CEO signatures on the Business Roundtable statement were not endorsed by the companies’ board of directors. The researchers conclude, “The most plausible explanation for the lack of board approval is that…CEOs did not view the declaration as a commitment to make a major change in how their companies treat parties. stakeholders. Absent a major change, they felt there was no need for formal board approval. »
3. Strategies to operationalize
Prevent unnecessary purpose by developing and implementing strategies to operationalize your purpose.
McKinsey Consultants Explain“Purpose must guide everything else and be evident in everything a business does. A fully integrated purpose must appear in all elements of the organization’s DNA.”
Your goal strategies should cover all business activities:
- Business – product/service portfolio, asset utilization, capital allocation
- Operational – operational processes, supply chain, distribution, customer experience
- Organizational – organizational design, talent acquisition and retention, employee culture and experience, performance management
To support all of these strategies, you need to put in place performance indicators and reporting systems that reflect and support your objective. Consider what data and evidence are essential to understanding your organization’s non-financial performance; what performance goals and incentives are needed to ensure employees are aligned and focused on your goal; which stakeholder groups should receive what information to support implicit responsibilities in pursuing your objective.
In a recent McKinsey survey, 82% of American workers said it was important for companies to have a purpose, but only 42% said their company’s stated purpose had any real impact. Now that the stakes are so high and the world is watching, it’s time to close that gap.