Purpose: what are you waiting for?

The recent Business Roundtable (BRT) pledge about the purpose of business is one of the most significant events to occur recently by corporations in their focus on creating long-term value for their employees, customers, communities, business partners and shareholders alike. However, there are many skeptics and, accordingly, it’s critical that purposeful leaders and purposeful companies take action to prove their commitment to this cause.

A recent survey conducted by Brandpie dove into the tantalizing term purpose and what it means for CEOs. Brandpie’s list of CEOs surveyed included over 700 CEOs in parts of the US and in Europe.

What? CEOs have a short window to make an impact.

According to CEOs surveyed by Brandpie, many newly appointed CEOs believe they have 90 days to make an impact on the organization they are leading. The increased pressure on their performance is compounded by this 90-day window, creating short-termism. Short-termism by definition means to focus on short-term results, neglecting the long-term interest of one’s company. As a result, many CEOs are challenged by balancing the immediate with their desire to improve their long-term sustainability. Additionally, shareholder expectations complicate the ability to strike a balance between the short term and the long term. Twice as many CEOs are motivated by shareholders than by society. Regardless, the longer a CEO is in their position, the more important long-term sustainability becomes, as does the need for CEOs to take an active role in defining their purpose.

So, what? CEOs are having to balance the pressures of the short term and the long term.

The fact is, now, more than ever, today’s CEO is expected to step outside of the issues of business and contribute to solving social and economic issues. Sixty-four percent of people globally expect CEOs to lead on social change rather than wait for government intervention, and 63% of millennials chose “improve society” over “generate profit” when asked what businesses should aim to achieve. Of the CEOs surveyed by Brandpie, 65% believe that the main role of their purpose is to connect with employees or customers.

CEOs are aware that purpose should play a role in their leadership, but they are struggling to put it into action and to do it quickly. And therein lies the disconnect. Ninety-seven percent of CEOs believe there is a role for purpose in an organization, but only 27% believe it is most effective under their ownership.

Now what? CEOs need to take action.

Brandpie’s survey also found that CEOs of smaller companies are more inclined to define purpose than CEOs in larger companies. This is most likely due to the fact that many smaller company CEOs have been leading these companies since their inception. But, perhaps, CEOs of larger companies should take note of purpose-led small companies by taking more of a role in defining the purpose. Shifts in consumer behavior suggest that consumers increasingly want to feel a sense of connection with a business, and purpose allows companies to make that connection. BlackRock CEO Larry Fink was quoted in the survey saying, “Purpose is not a mere tagline or marketing campaign; it is a company’s fundamental reason for being — what it does every day to create value for its stakeholders. Purpose is not the sole pursuit of profits but the animating force for achieving them.” This is not just an aspirational statement, as evidenced by recent corporate actions such as DICK’s Sporting Goods getting out of the assault rifle business and Walmart leaving the vaping business. More CEOs can, and should, balance their focus on shareholder value and stakeholder value. 

So, what are you waiting for? Stop just raising awareness and start taking action.

Source: “CEO Purpose Report,” Brandpie website, https://thinking.brandpie.com/ceo-report/, accessed October 24, 2019.

The views expressed are those of the author and do not necessarily represent the views of Ernst & Young LLP or any other member firm of the global EY organization.