Is purpose elusive or are organizations evasive about purpose?

Apart from ‘strategy’ , ‘leadership’ and ‘culture’ the most often spoken word in the business speak these days is ’purpose’. Every fifth article in business periodicals mentions the significance of purpose and the same is echoed by public-relations and communications team of every third company across the globe. Mentioning or citing purpose is the new fad of the corporate world, which cannot resist the temptation of turning terms into platitudes, that the terms lose their sanctity.

The pandemic made an individual question the role work plays in her life and an unsatisfying answer to this question snowballed into ‘The Great Resignation’. Leaders started asking themselves as to what will motivate an employee to show up at work when the world around her is wallowing in crisis.?Few organizations were agile enough to lunge to flatten the impact of the pandemic’s curve, while others found themselves non-plussed about how to accost the pandemic.

Debunking myths about purpose:

Purpose, like leadership, is a simple word in English yet it has multiple connotations and interpretations. In the most simplistic manner, purpose of an organization is its essence; purpose is the reason for existence of an organization. It answers questions like, ‘what would happen if that organization did not exist? ’Who would be at loss if this organization cease to exist?’

Needlessly, a simple pursuit of essence- purpose has been intertwined with lofty ideals in such a manner that it has come to be identified as something very social-centric or altruistic. The situation becomes complex when in search of accolades from the media or attention from candidates in the job-market, an organization ends up misrepresenting its true self for what it aspires (may be or may be not) to be. We vividly remember the backlash of the media when it panned Pepsi’s advertisement featuring Kendall Jenner in 2017. The advertisement factitiously tried to create a link between Pepsi and social justice when there was obviously no intuitive connection between the two.

While there are companies that actually have a purpose and they sincerely believe in it, and adhere to it while making decisions, there are also entities, which try to increase the power of their brand through flamboyant statements of corporate purpose. We found ourselves looking out for the possible reasons that accord purpose an intrinsic strength so powerful that companies are willing to delude themselves.

In the world after the pandemic a linear and top-down strategy will not work. A north star is needed as a guide in periods marked by sudden and stubborn maelstroms; purpose is that north star. While one of us was carrying out his individual researches on “The Future of Work” and “” Millennials’ he came to realize, that we need to move beyond our fixation for system, strategy and structure and be attentive to the trio of purpose, people and process.

How has Apple or 3M managed to retain its innovative capability despite reaching a gargantuan scale? How did Tesla manage to mass produce an electric vehicle Roadster only six after GM itself wrote its obituary in 2002?? How did GE succeed with GE Ecomagination when its entire ecosystem was not ready for sustainability? A common thread underlying the similarities among these companies is their focus on purpose, people and management processes along with their disillusion with strategy, system and structure.

Strategy formulation has long been based on the assumption that the CXOs along with the CEO are beholden for giving shape to the strategic intent. However, the reality is that the information, knowledge and expertise needed to create strategy are present only in the front-line and that’s the underlying theme of the book, ‘Open Strategy’ by a team of four accomplished academicians – Christian Stadler (professor Warwick Business School), Julia Hautz, Kurt Matzler and Steven Eichen. Andy Grove of Intel, in fact, candidly admits that frontline at Intel had the foresight to see that the next focus for Intel had to be microprocessors and the importance of memory chips had begun to wane two years before the management woke up to the reality of microprocessors.

This new approach to strategy-formulation can actualize only when employees [ front-line] can identify with the organization, in which they share a sense of pride, and to which they are willing to commit and these conditions can be met only when they are embedded in a broad, expansive organizational purpose. Sumantra Ghoshal and Christopher Bartlett have argued that in order to inspire extraordinary effort and sustained commitment to deliver consistently superior performance, companies require employees who have a strong emotional link with the organization and this link is quite often the offshoot of a compelling organizational purpose.

Michael Porter is of the opinion that innovation has perhaps become the most important source of competitive advantage in advanced economies yet companies have not been able to extract maximum advantage from their spendings on innovation. In 2005 Booz Allen Hamilton conducted a study on one thousand biggest spenders on innovation – companies with the largest budgets on R&D. It, surprisingly to us at least, found no significant correlation with any of the defined measures of corporate success- not profits, not revenues, not growth and not even shareholder returns. Simple decision to innovate doesn’t achieve anything rather how innovation serves a larger purpose, determines the value of investment.

In fact, in a reprint of an article originally published by Booz Allen Hamilton, Nikos Mourkogiannis states that when innovation is carried out with a purpose in mind it develops a fourth dimension of purpose, comprising of one of the four elements of discovery, excellence, altruism and heroism. Where innovation happens without a compelling and an enduring purpose, innovation has only three dimensions- technology, customer and competition. Only through this extra dimension of purpose that an entity can think outside existing conventions and that’s what it takes to create that competitive advantage as per Michael Porter.

Apart from an enduring purpose what else can explain the success of Henry Ford in adapting the meatpacking techniques in his assembly-lines? What else can be the reason for Aristotle Onassis, apart from purpose, that he pioneered cruise ships by observing and borrowing ideas from the hotel industry. Another impromptu example is that of Nathan Rothschilds, who struggled with the idea of how his international network could be leveraged to make payments locally to international bond holders; he, basically, ruminated upon the idea of generating new benefits for his customers through the uniqueness of his organization.

Why is purpose elusive?

So why purpose has been so elusive for companies across sectors and geographies? It is because companies commit mistakes in defining purpose, which is authentic and which reveals their true selves.

·??????The first mistake which companies do is that they entrust their marketing/branding function to formulate their purpose. The goal of purpose apart from delineating the essence of the company is to achieve buy-in from a broad set of stakeholders whereas the goal of marketing/branding is to convince and cajole customers into buying the company’s products/services.

·??????The second mistake is when companies confuse purpose with social good. It is not at all necessary for a company to have an altruistic mindset or soul. It has all the rights to survive and excel as a profit-making entity that serves, to a great extent, its fiduciary responsibilities. Take the example of McDonald’s – it defines its mission as “to be our customer’s favorite place and way to eat and drink”. McDonald’s understands that it can’t claim to profess societal good or to promote a social cause, and it accepts that satisfying the functional, emotional and, here, gastronomic needs of the customer is a very much justified reason for existence.?It will be an icing on the cake if McDonald’s tries to increase nutritional value of its menu or work upon improving the environmental footprint of its suppliers but these pursuits will never be a part of its purpose though they will be beneficial for McDonald’s.?In contrast, Google created a ballyhoo about its mission, “to organize the world’s information and make it universally accessible and useful” where its advertising-driven business model is found to be at odds with its stated mission.

·??????Companies are very susceptible to using elevated statements such as changing lives, enabling communities, building planet etc. etc. The truth is not all the companies can be involved in social good, and may find themselves lacking the charisma of a powerful, reverberating and echoing statement of purpose. In this scenario it is prudent that companies focus on satiating the psychological needs of the customer.

·??????Most of the enterprises are convinced that purpose and profit are at cross-roads with each other and there is always an inherent trade-off between the two. The truth is a profit generating company without any concern for society except adherence to regulations about emissions and other negative externalities etc. can also create a purpose for itself. In a contrast, another company can be an underachiever in business and it may pursue societal welfare as its prime objective. A majority of companies now try to find a win-win solution between the purpose [ societal good] and profit. Nike, GE Ecomagination, Tesla and Chipotle are quite relevant examples of this win-win situation.

·??????Quite often there is a competence-culture-cause gap in firms making these firms weak on purpose. Companies may be good in creating customer-value, but they might not be equally good as employers for example. Amazon and Walmart are touted for creating consumer surplus, but they have been at the receiving end for the way they treat their employees. Also, in many companies, we have observed that there is a perceptible disconnect between the cause they espouse and the culture they nurture. Uber and Volkswagen are two prominent examples. In both these companies there is, it seems, a culture of turning blind eye to toxic behavior [ Uber] and illegal behavior [ Volkswagen].

How to arrive at a meaningful purpose?

?????????The process of finding a meaningful purpose starts with a goal that is directly connected to the business. It has to be real, tangible and live; it has to be something that people feel that they can do. An example that comes into our mind right now is that of British Sugar and its CEO, Paul Kenward. This example comes into being to illustrate and acknowledge the fact, that unlike healthcare and non-profit organizations, a company in commodity business can also build a purpose around its core business, in this case, a company, British Sugar, that processes beets for sugar, has all its crops homegrown and has reduced its water consumption by 26% since 2014 creating a thriving home-grown sugar industry. This example also illustrates how employees are enjoined with something that is bigger than the company itself- a home-grown sugar industry with zero imports and water -consumption lower than the industry’s average.

Deep purpose companies approach creation of purpose as a strategic exercise and not a communication exercise. This is because they understand that a ‘genuinely believed’ in purpose can augment the transformation, which is needed to stay relevant in this era where very few companies exist to see their 50th birth anniversary. Also, the pursuit of ESG (environmental, social and governance) is laudatory but that should not be confused with purpose because ESG is not equipped to answer the question, in light of customer-value proposition, as to why an organization exists? Mind it! the purpose should support business objective- international expansion, premium pricing and product innovation etc. etc.

Every organization, however undifferentiated it may be, has a unique quality, which often is unknown to not only the employees but also the management. Whether that unique quality is its culture, its processes or its customer-centricity depends on company to company. That unique quality can be the foundation of a compelling purpose. Aadhar Housing Finance Limited, where I was the Head of Human Resources and Administration, developed an ability, by which its sales team took only those prospective customer’s applications to the credit underwriting team of whom they were convinced of getting approval from the underwriting team, and thus saving time in processing of loans and generating an impressive 90% success in application to approval ratio.

In our opinion, the simplest way to arrive at purpose, and this is not serendipity, we must say, is to look at an intersection of four basic yet significant questions-

·??????What the world needs?

·??????What the company is uniquely good at?

·??????How the company can create economic value?

·??????What people at the company are passionate about?

The intersection of these four questions will, to a great extent, throw light on the elusive’ purpose.

Conclusion:

Purpose has a direct impact on corporate governance, sustainability, employee engagement, demand generation and corporate strategy. To maximize the potential of purpose a company should align its purpose with its value-proposition. Purpose is the moral response of a company towards its broad responsibilities and it differentiates between a moral response and an amoral plan for exploiting commercial opportunities. Purpose is the reason organizations exist, and it is critical that the top management/leadership establishes and nurtures?an organization’s purpose.