Ranjay Gulati | Harvard Business School Professor on Deep Purpose and the ‘Soul’ of High Performance Business

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Nina: Professor, I'm so excited to get to talk with you. Your research at Harvard and previously Northwestern has studied everything from acquisitions and customer-centricity to startups and corporate purpose. That’s a huge span of topics! What do you see as the connecting thread?

Ranjay: Absolutely! I’m excited to be here Nina, thanks for having me. I've been studying organizations for almost 25 years. I think what has always puzzled me is how, within business, good ideas and good intentions can have poor results. People loosely call this “poor implementation.” In management, we have this concept called the knowing-doing gap. You know what to do, you know how to do it, but you don't do it. That's what I've been studying for much of my career, and it's probably the connecting thread.

I began by first studying alliances and acquisitions between companies, looking at how after a honeymoon period where we think we’ll be together forever, about 80% of these partnerships fail. I wanted to understand why. I then looked at another topic, what we tend to call “customer-centricity.” Every company gives lip service to the idea that they are very customer-focused or customer-oriented. But when you look closely, you find none of them are. I wanted to explore what was going on there. And then I looked at this same poor implementation challenge within the startup context: startups can have lots of customers, lots of capital, and grow so fast, but then run off a cliff. Why is that? These are the kinds of puzzles I’ve been trying to solve.

My latest project is probably the deepest topic I have ever taken on. I’ve been focusing on the topic of purpose. To think about what it is to have purpose, let’s start with what it means to not have purpose. When we look at organizations or even people, purposelessness leads to reactive, fearful behavior. We're constantly reacting to what's happening around us. We’re constantly second guessing whether we’re doing the right thing. Should we act? Should we not? And you think, wow, if only I had a purpose, I’d be much more proactive with my life, right? It would liberate me to be free to do what I think I need to do and what I must do.

So it sounds like a very basic idea for an individual, but most of us don't have a personal purpose that animates us. Similarly, for organizations, everyone talks about having a mission statement, and most companies by all accounts have a mission statement, but it's nothing more than wallpaper. So, again I came to the topic of purpose as another puzzle of a great idea but poor implementation.?

Nina: The people that I talk to tend to fall into one of two views around this puzzle you describe. The first sees corporate purpose optimistically, as a great idea with so much potential to guide companies on a ‘reimagining’ journey. The second view tends to fixate on what you call the implementation gap, and these more critical voices see purpose as a smoke and mirrors sham to run business-as-usual. In other words, in bad implementation, they see bad intentions.?

As you studied both good intentions and bad implementation, I’m curious what surprised you in your research. Can we add more dimension to purpose than these two opposing viewpoints suggest?

Ranjay: Yes, there were so many surprises! First thing, I found a lot of purpose confusion, both at the individual level and organization level. What is it? Why does it matter? How do you do it? The what, why, and how questions were all not well answered. So it becomes an abstraction.?

I think the other thing I found was purpose hijack. By this I mean you have one wing saying, "Oh, the purpose of a business is shareholder value," and another wing saying, "No, purpose is all about anything but profit, anything but shareholder value." So you have this multiplicity of perspectives kind of floating around out there. And so people say, is it social stuff or is it not social stuff? Is it a tax on business or is it not a tax on business?

I also saw a lot of lip service thinking. Human resources says, “We'll tell employees and prospective employees we are a very purpose-driven company. Young idealists will want to come and work for us." Then you have marketing saying, "No, no, no, purpose is good for branding. Purpose branding is really important. Customers will trust us." Others say, "Oh, it’s investor expectations. They're asking us now, Larry Fink and BlackRock are asking us about purpose. Let's kind of parade a purpose." And I think all these things make everyone cynical because you have the extreme versions and so much purpose parading going on.?

With all this noise, the real value of the purpose gets lost in a sea of what I call superficial purpose. It's wallpapering really, and used as an extractive force. You’ve talked about this as predatory purpose I believe. And it’s this kind of wallpaper, superficial purpose that leads to the performance gap.?

Nina: Your new book, Deep Purpose: The Heart and Soul of High-Performance Companies, focuses on how to move past wallpaper purpose. What does it take to close the purpose performance gap??

The performance gap disappears, I discovered, when companies have what I call Deep Purpose. By this term, I mean to distinguish the company that really understands this idea that purpose is not an extractive force, it's a generative one. It can allow you to become more productive.?

I want to be very clear. Deep Purpose is not a purpose statement. The companies I studied embedded purpose much more deeply than that, treating it as a radically new operating system for the enterprise.?

The book tells the stories of many leaders—some you might expect, others you might not have heard of—who understand the game-changing results this kind of Deep Purpose can deliver. I looked at Satya Nadella, the CEO of Microsoft. I looked at Viraj Puri, who's the CEO of Gotham Greens, the agro business company. I looked at J?rgen Vig Knudstorp, who was the former CEO and now chairman of Lego. I looked at Anand Mahindra of conglomerate in India, Mahindra.?

These companies and their leaders are fantastic examples. But one of the places where Deep Purpose really came alive for me is in small companies. At the seams of writing this book was my own experience working in a family business. And when you talk to founders of family businesses most are driven, not just by an idea, but also by an ideal. They want to change the world in some way. And it involves commercial and social aspects. So it's not like it's only one or the other. It has this kind of broader idea of its existence: "I want to have an impact on the world. We're going to change the way this business operates. We're going to change the way this market works. We're going to uplift our community." It's an expansive, ambitious statement, right??

This kind of ambition increases the imagination, the collective imagination, of the organization. And I think in a changing world out there, it also gives you a walking stick. It gives you clarity, because purpose liberates. It makes you proactive. So the bulk of the book is, how do you do it? It’s really about, how do you do purpose, in a deep way?

Nina: I want to talk about one word in the title of your book, ‘soul.’ You don’t tend to see words like this in such a practical business guidebook. I’m wondering if you could speak a bit more to this soul idea and how it’s related to Deep Purpose in your mind.

Ranjay: Yes, you’re right, ‘soul’ is an interesting idea for business. Here is how I see it. Soul tends to be something at the heart of a business, often since its inception. What I learned is that founders, when they leave or when their company gets big, they would kind of start talking nostalgically about the good old days. They perceived that something got lost in the process.?

Howard Schultz, when he came back to Starbucks for example, he was like, "Starbucks has lost its soul." When I talked to Satya Nadella, he also talked in soul-like terms about Microsoft needing to rediscover its soul. You look at Lego's turnaround, the CEO talking about rediscovering its essence, right? Or you look at Pepsi, the CEO talking about something that this soul-like thing.?

So what is this soul thing, or is it another hard to pin down term like purpose that we’ll get lost in. Sumantra Ghoshal, who was a professor at London Business School, used to call a company’s ‘soul’ the smell of the place. Some are quick to interpret this as, “oh, yeah yeah, soul is the culture of a company.” Culture became a residual catch all, since it's about other tricky terms like behaviors, norms, and beliefs. It's very circumscribed, but culture is less about why we exist and much more about how we do things.?

The ‘why we exist’ is the Deep Purpose, the soul. It’s all about building emotional connections between your employees and their work. You're trying to elicit a sense of pride, a sense of connection. It's really tapping into emotion or what you might call intrinsic motivators.?

Nina: On that emotional connection—I have to ask. When people talk about the Great Resignation they talk about people wanting to be either more connected or less connected emotionally to their day jobs. What’s your take??

Ranjay: Yes this is a very important topic. In economics, we describe organizations as a nexus of contracts. The idea is that everything can be broken down into a contract, that life is a contractual exchange. Well, if that's how you imagine an organization, that's what you're going to get.?

The Great Resignation shows what we already knew: people want more than a contractual relationship with their job. And especially during the pandemic, some people realized the contract was skewed to their company’s advantage.?

The short of it is that we now expect more out of work. You can’t compartmentalize your life with your day job as just one component. It’s not acceptable anymore, for many of us. We want coherence in our lives. I should be doing something meaningful even in the daytime, not just after working hours. So understanding what that is, I think is very important. Human beings, individuals, we have personal purpose for our life, we have purpose for our job, purpose for our career. We might instead see the Great Resignation as the Great Rethink.

In my opinion it makes an even stronger case for Deep Purpose in our organizations. There is a layered construct. And the question is, how do you connect individual purpose with organizational purpose? And I think in COVID times, this has become even more important. Because we are facing a meaningful challenge in the world today—which I know your work thinks a lot about. The Great Resignation, the Great Reshuffle, COVID, introspection, illness, death. We all had to see things firsthand. And the result is we expect more of our lives, which is a good thing.

Ranjay Gulati is the Paul R. Lawrence MBA Class of 1942 Professor and the former Unit Head of the Organizational Behavior Unit at Harvard Business School. Until recently, he chaired the Advanced Management Program, the flagship senior leader executive program, at the school. Professor Gulati studies how “resilient” organizations—those that prosper both in good times and bad—drive growth and profitability. His work bridges strategy (establishing clear strategic pillars for growth), organizational design (reimagining purposeful and collaborative organizational systems), and leadership (fostering inspired, courageous and caring execution).

He is the author of a number of books, including DEEP PURPOSE: The Heart and Soul of High-Performance Companies (HarperBusiness; February 8, 2022), and has been a frequent guest on CNBC and other media outlets. He has also served on the advisory boards of several entrepreneurial ventures. Professor Gulati holds a Ph.D. from Harvard University, a Master’s Degree in Management from M.I.T.’s Sloan School of Management, and two Bachelor’s Degrees, in Computer Science and Economics, from Washington State University and St. Stephen's College, New Delhi, respectively. He lives in Newton, MA.