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traci_maddox
Explorer
538
I created this blog post along with my co-author darragh.power and it was a fun collaboration!

Purpose. You see the word everywhere today. Nearly every trend report or study has “Purpose” as a highlight. The real question is WHY is purpose coming to the forefront now and how does it affect business results? Let’s start with why.

Enter COVID-19. This global pandemic has not only changed our lives, but also has highlighted the connection of the “before times” to climate impact. It brought forward how interconnected we all are with impacts on the way we shop, how goods get made and delivered, and how businesses run. And maybe the biggest impact of all—COVID has given us time to consider how we might make things better in the future rather than just going back to pre-COVID ways.

This Porter Novelli report discussed the top purpose trends for 2021. They include carbon neutrality commitments we have all seen in the news, a focus on inclusivity, collaboration rather than competition to solve worldwide problems, and changing business models to embrace sustainability as a way of life. Corporations have embraced the idea that being purpose-led will also lead to more resiliency and success—so much so that the Business Roundtable changed their definition of a corporation’s purpose (for the first time since 1977) to include benefits for all stakeholders – customers, employees, suppliers, communities, and shareholders. Business has a new or renewed interest in creating a future with a smile in it for these stakeholders

Employees, Investors, and increasingly governments, consumers, suppliers, and partners all want a future with a smile in it.  Some questions to consider are, what smiles are you creating, for who, and how far into the future?

With such a diverse group of stakeholders, how can you make people care about your business? Purpose means something different to each of the stakeholder groups.  Investors want a future smile for their money, employees want a future smile for their career, partners want a future smile for their business, and the wider community wants a better world.

Cynthia Montgomery Timkin Professor of Business Administration Director of Research at Harvard, asks executives “who would care if this business ceased to exist?” One way to consider purpose is the “Why” companies do what they do.  We suggest that before looking at the “Why” look at “Who” is at the heart of an organization.  The model below gives a way of considering purpose for the stakeholder groups involved in any company today, and their various motivations.


The Heart of an Organization--Purpose Action Model


Organizations do not exist independently of the communities that they serve, and most organizations must prioritize how they will serve their stakeholders.  Different organizations take different approaches to prioritizing in a conscious way. For example, , B Corporation certified businesses consider a wide variety of societal stakeholders (Patagonia for example) in their decision making, while clearly being for profit organizations, so they are balancing the needs of different people.  In many Not-For-Profit organizations the users of a service or employees might be the heart of their organization (CaféDirect in the UK for example).  These conscious decisions are made in addition to the traditional concerns publicly listed companies use to drive shareholder value.

Purpose:

Who the company exists to serve determines the type of purpose or “Why” they articulate, and the level of organizational motivation to take action on their “why.”

For example, a company who wants to comply with Environmental, Social and Governance Regulations will likely have a small Corporate Social Responsibility office, and do the minimum needed. Other companies want to go further declaring carbon neutrality above and beyond regulatory requirements like Brewdog who aim to be carbon negative.

Many companies sign up to groups like the Responsible Business Alliance or sign up to the Business roundtable which declares:

“Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

Level of Care:

It is one thing to state your purpose and another to commit and act on it. Many employees, consumers and community members need to see that the purpose is authentic, and companies are putting their money where their mouth is.  For this reason, they consider the Level of Care the organization displays—most likely around their own interests and needs!

Businesses face a big challenge in serving this variety of stakeholders because they have complex and often conflicting priorities. To close a coal fired power station might be good for the planet, but the workers impacted by the lay off will often have a different opinion. Companies must balance conflicts like this every time they make major business decisions—how to make it a “win-win-win” for everyone.

Actions:

In times of change (or crisis), the level of care companies show for their stakeholders really comes to life.  Recent protests at Boohoo highlighted the need for balance between price and fair trade/labor practices.  Another recent example is inclusion, and political wrangling at Basecamp which saw one third of employees leave after their approach to an inclusion issue created more division in the company rather than more inclusion.

Actions are the only thing that lead to impact. Without authentic commitment the day-to-day actions will not be congruent and competing commitments will mean that profit and purpose will be in conflict and the impact of the company (and possibly its success) will diminish.

If your organization is looking at future resiliency and success, here is where to start. Gain clarity around 3 things: who you serve, why you do what you do, and how the values and level of care are committed to over time with action. Do you have this in your organization? Please comment and let us know how this is working in your organization.

In our next blog post we will consider an increasing body of evidence that highlights how harmonizing purpose and profit can lead to significantly higher returns, better work cultures, and increasing benefits for all stakeholders.  Doesn’t that sound like a future with a smile in it?

 

 
2 Comments
claudia_mandelli
Explorer
Great blog Traci. I especially like how you describe purpose as driven across many stakeholders groups: shareholder, customers, employees, communities and suppliers. These seem to interrelate quite a bit: for example, customers care how a company acts towards communities or employees. What do you think?
traci_maddox
Explorer
Hi Claudia and thank you for your comment. I totally agree with you about the interrelatedness of all elements of Darragh's model in the blog post. It is very difficult to segregate one of these stakeholders from the others. I know I as a consumer agree that if a company doesn't treat it's employees or the community in a way I respect, I will not be a customer very long. I'd love to her other perspectives on this whether you agree or disagree!