Purpose has become a strategic imperative for business success today. Writing a purpose statement is easy; what comes next is the hard part. Purpose helps transform the connection between employees and the organization into one of trust and commitment rather than transactions and contracts.
As Jørgen Vig Knudstorp, former CEO of LEGO, said, “If you want to transform, not just change, a company, you need to find the essence of the brand, its unique identity.”
Satya Nadella, CEO of Microsoft, described the role of purpose in his transformation of Microsoft: “We must rediscover our soul, our unique core… We must all understand and embrace what only Microsoft can contribute to the world and how we can change the world again… In our context, technologies come and go. Strategies come and go. You need this leash, which keeps you in place, which is a sense of purpose.”
The deep purpose companies I know, many of which we helped transform, understood the transformative potential of purpose and perceived it as similar to changing the organization’s operating system.
These fundamental changes do not come easily and require considerable time and effort.
But as these brands and others show, it’s well worth the effort!
There is evidence to support the idea that companies with a strong purpose not only have a positive impact on society, but also reap significant financial and growth benefits.
By investing in an authentic purpose and communicating it effectively to their customers and employees, companies can differentiate themselves in the marketplace, build stronger relationships and generate solid long-term financial results.
The other good news is that purpose is a way of being, not a slogan.
Here are some facts and arguments that might help you convince your Board of Directors why purpose-driven companies are more profitable, earn more and are better:
- Revenue growth: According to an Accenture study, companies with a clear and authentic purpose experienced 10% revenue growth compared to 4% for those that did not. This study also revealed that 63% of consumers prefer to buy products and services from companies that have a purpose that goes beyond profit.
- ROI: A Deloitte report showed that companies with a focus on purpose earned an average ROI of 9.85% compared to 8.71% for companies without a focus on purpose. This indicates that investing in a strong purpose can generate a positive financial return.
- Building trust: According to the Edelman Trust Barometer, 81% of consumers trust companies that have a purpose beyond profit. Consumer trust is a crucial factor in a company’s long-term success and sustainability.
- Employee productivity and engagement: A Gallup study found that employees who believe in their organization’s purpose are 5% more productive and 20% more engaged compared to those who do not. In addition, 87% of employees satisfied with their purpose at work feel committed to their organization.
- Market value: The Dow Jones Sustainability Index (DJSI) demonstrated that companies that focus on sustainability and purpose outperform their competitors in terms of market performance. Companies included in the DJSI have shown greater resilience and a better ability to create long-term value.
In today’s business world, purpose has become a key driver of success. Companies that operate with a strong purpose experience significant growth and outperform their competitors.
Here are more data and examples that illustrate why purpose-driven companies outperform:
- Customer loyalty and preference: According to a study by Cone Communications, 87% of consumers are more likely to purchase a product or service from a company that advocates for issues they care about. Patagonia, for example, has demonstrated an unwavering commitment to the environment through its “save our planetary home” purpose. This stance has generated a loyal customer base and brand advocates.
- Attracting and retaining talent: A Deloitte report reveals that 83% of employees would prefer to work for a company with a purpose they believe in. Companies have succeeded in attracting and retaining engaged talent that is attracted to their purpose and positive impact.
- Innovation and strategic decision making: A study by PwC found that 79% of executives believe that having a clear purpose guides innovation and strategic decision making.
- Resilience and adaptability: During the COVID-19 pandemic, many purpose-driven companies stood out for their resilience and adaptability. For example, companies like Airbnb, which focus on connecting people and fostering community, used their purpose to pivot quickly and offer new virtual experiences, allowing them to stay relevant and generate revenue even in times of crisis.
These examples illustrate how companies with a strong purpose can generate significant competitive advantage. By focusing on an authentic and relevant purpose, companies can establish deeper connections with customers, attract quality talent, generate a greater sense of belonging, foster innovation and overcome challenges.
Purpose helps give your company a line of sight into the future. A sense of common purpose helps keep everyone in the organization moving in the same direction.
Purpose also encourages long-term thinking. Having a strong purpose can refine the strategic response. Rather than focusing solely on hitting financial quarter numbers, purpose can keep organizations focused on driving sustainable value over the long term.
A large U.S. retail chain took a bold stand when it decided to stop selling cigarettes because, according to its CEO, “Simply put, selling tobacco products is inconsistent with our purpose.”
That decision meant giving up some $2 billion in annual sales. But its purpose of helping people on the path to better health drove its strategy and an authentic customer experience as a pharmacy and as a health care provider to top-tier clinics.
It’s an inside-out strategy and not outside-in; you don’t just look at where the opportunities are and where you can make a lot of money as a way of deciding where you should be. You decide where you want to be strategically based on what you want to do and what you want to be.
But it’s not all about the long term; purpose also helps simplify day-to-day management. By encouraging company leaders to focus on the horizon, purpose helps them consider their internal systems holistically – a habit that suits today’s flatter, more diverse and intrapreneurial organizations.
A Harvard Business Review Analytic Services survey sponsored by the EY Beacon Institute. suggests that purpose is a powerful yet underutilized tool.
The survey defined organizational purpose as “an aspirational raison d’être that inspires and provides a call to action for an organization and its partners and stakeholders and delivers benefits to local and global society.”
Ninety percent of executives surveyed said their company understands the importance of such a purpose.
- Most executives believe that purpose is important.
- 89 percent of executives surveyed said a strong sense of collective purpose drives employee satisfaction
- 84 percent said it can affect an organization’s ability to
- Eighty percent said it helps increase customer loyalty.
- Only a minority said that their company currently operates for a particular purpose.
- Forty-six percent said their company has a strong sense of purpose.
- Another 44 percent said their company is trying to develop one.
Companies are facing an accelerating pace of change as digitization, disruptive business and rapidly changing consumer expectations reshape their world.
At the same time, demands from a new generation of employees for meaning in their work and a broader debate about the role that companies and brands can or should play in society are reshaping the expectations of organizations.
In recent years, a growing number of corporate leaders and experts have spoken out on how a strong sense of shared purpose can help companies meet new challenges and transform their organizations. To understand why and, more importantly, how companies employ purpose to guide and drive their transformations,
Although there is near unanimity in the business community about the value of purpose in driving performance, less than half of the executives surveyed said their company had actually articulated a strong sense of purpose and used it as a way to make decisions and strengthen motivation.
Only a few companies appear to have integrated their purpose to the point where they have reaped its full potential. But in those organizations where purpose had become a driver of strategy and decision making, executives reported a greater ability to generate revenue growth and drive successful innovation and continuous transformation.
Even after the company is fully aligned with a compelling purpose, leaders must continue to reinforce it from the top. You can’t just adopt it. It has to be driven, operationally and deeply, by the CEO and the management team. That takes a lot of skill and understanding to do well, which is why so few companies actually do it very well. For now.