The Purpose Variable

Purpose is en vogue. As market participants and individuals were looking to increase their personal resilience during the Corona pandemic, the big consultancy firms were fast in responding with the sudden need and benefits of purpose. This term, often regarded as a soft factor, and a bit "touchy-feely", disregarded by many organizations by putting it on a poster ("at least we have one"), is gaining in significance.

Money-making and purpose-orientation are often regarded as opposing forces. Especially for financial institutions, it can be hard to distinguish: while all businesses are striving to make and increase earnings, for financial institutions "money" is often the product itself. It might even be the higher vision. Whereas a healthcare company might want to "increase the health of all people on the planet", a financial institution might want to "increase the performance of every investment portfolio on the planet". This fixation on money is understandable. But it misses the point. As Simon Sinek puts it:

"Very few people or companies can clearly articulate WHY they do WHAT they do. When I say WHY, I don’t mean to make money—that’s a result."

The confusion is probably easier to make for financial institutions than it is for other institutions. How to introduce purpose then?

The outer vs. the inner game

In "Mastering Leadership", Robert Anderson talks about the inner game and the outer game of a leader. The inner game is related to purpose, values and foundational beliefs. The outer game is about managerial competencies and leadership skills.

I find this mental model to be very effective when looking at a topic such as purpose in an organizational context: most businesses only look at it from an outer game perspective: what strategies can we implement to make this work? How to offer a new product that people put more trust in??

The problem with that is: it completely misses the point. You cannot sustainably change your outer game without looking at your inner game, first. The challenge? The inner game does not start in a strategy meeting, or a retreat - it starts with every individual.?

The Purpose Variable: Phi?

Your "why" is important. From a person who has worked in asset management before and now has discovered his purpose, I can tell you from my own experience how valuable it is. But let's focus on the bigger picture here instead of the individual's benefit for the moment. Are there business-related benefits?

According to a study performed by the CFA Institute, a majority of asset managers say that although there is a lot of passion present about financial markets in the industry, there is a general disconnection from a true purpose. They even introduced a new Greek letter - phi - that incorporates motivational and long-term interest alignment into the equation:

"Unlike concepts that measure the value added by investment professionals according to how they outperform an external benchmark, a recognizable index, or even their peers, phi allows for much more introspection and less focus on competition. It turns the lens inward, focusing on the motivation and purpose that underpins the investment firm and its staff members and shifting the motivational core from that of outperformance to providing long-term achievement of clients’ objectives."

The benefits? The study supports others studies on the effects of purpose: a one-point increase in phi has been linked to a 28% increase in organizational performance, a 57% increase in employee engagement, and a 55% increase in client satisfaction.?

It is not about changing the strategy - it is about changing habits?

Introducing purpose is both a challenge and a big opportunity: it is a challenge insofar as you cannot just define an initiative to use it. You cannot turn purpose into a tool. It is not possible to sell purpose-driven initiatives to your employees if you are not ready to walk the talk, first. People are not stupid! They will realize you just use it as a tool. You cannot come up with just a strategy - that is the challenge.

You need to address it from the inside-out. This is where purpose comes from. It is not something you define. It is something you discover. It is only now that you can use it as a tool: you can base marketing campaigns on it, use it in hiring or in communication. You can remind yourself in every interaction with a person what it means to live your purpose. Through that, it becomes a behavior. Repeated frequently, it becomes a habit.

Introduce a new variable. Make phi part of your equation.

About me:

As leadership coach, I work with experienced leaders in asset management to navigate the structural changes in the market with more ease and a sense of direction. By identifying their purpose and discovering their inherent strengths, leaders act with more creativity and impress with authentic strength.?