CEOs and other business leaders are increasingly expected to lead with purpose, by tackling society’s greatest challenges. In fact, the Edelman Trust Barometer 2021 reports that 86% of people think CEOs should speak out on topics such as the impact of the Covid-19 pandemic and job automation.
But while ‘purpose talk’ has gone mainstream, organizations’ claims around purpose don’t always align with their strategy or their actions, exposing them to reputational risk. So how can organizations put purpose back into their business strategy? Here, five business school professors share their views:
1. Beware of “purpose-washing”
“Purpose-washing practices have ruinous consequences for both business and society,” says Gianluca Carnabuci, professor of organizational behavior at ESMT Berlin. “They are bad for a company’s long-term business sustainability and they erode trust – and hence social capital – well beyond the boundaries of the company.”
Carnabuci believes that leaders can win the fight against purpose-washing by “recognizing that organizations are social communities, not just brands”. He says: “Closing the talking-doing gap requires shifting from a view of purpose as a marketing asset to one where we view purpose as a fundament of the organization’s distinctive culture.”
Instilling purpose into the organization’s culture, and in the day-to-day work of employees at all levels of the organization, is a powerful way to build cohesive, thriving, and productive organizational communities. As Carnabuci notes, it is also “an effective way to keep leaders in check when short-term interests or pressures lure them away from the organization’s purpose”.
2. Identify the real heroes and villains
Thanks to social media, it is becoming ever-easier to recognize the difference between the heroes and villains when it comes to companies that claim to have a purpose. “The real heroes are those companies that are celebrated and embraced for their good deeds, which also foster customer loyalty,” says Pekka Mattila, managing director of Aalto University Executive Education in Finland. “Villains are companies that are not pretending: they pollute and act in an unpolished manner.”
He also highlights the existence of unrecognized heroes – companies that are “doing more and trying harder than what is being publicly acknowledged” – as well as fake heroes. Fake heroes are companies with a good image and reputation, but underwhelming reality.
“Nowadays, the fake heroes are finding their position increasingly unsustainable,” notes Mattila. “So CEOs had better be open about the reality and commit to an incremental agenda instead of giving big promises and being vague about their implementation.”
3. Ensure business and society are not opposed in your model
“The problem with purpose is how we frame the question,” observes Philippe Silberzahn, professor of Strategy at Emlyon Business School in France. “Originally in strategy, purpose was business-centered. For instance, Disney’s purpose was to make people happy. Recently the idea has evolved to imply a specifically societal dimension, seen as unrelated to business.”
Silberzahn argues that because purpose is conceived as “disconnected from business”, it has to be found outside rather than from inside. “It is no wonder that strategy and purpose are not aligned, and that businesses are accused of purpose-washing,” he concludes.
To find a way out, leaders need to do two things, according to Silberzahn. The first is to reframe the issue using a model where business and society are not opposed, by recognizing that there are many ways in which a business by itself contributes to societal issues. Secondly, they need to revisit the core identity of their organization, consider what makes it unique, and build on that to connect to the universal needs of humans and society.
4. Rethink the fundamental purpose of business
In putting purpose into practice, businesses must accept three truths, according to Colin Mayer CBE, Peter Moores professor of management studies at Oxford University’s Said Business School in the U.K.
These three truths are as follows: The purpose of business is not to create profit. Secondly, the purpose of business is to create profitable solutions to the problems of people and planet. And, finally, business is not to profit by creating problems for people and planet.
Mayer acknowledges that profits are the lifeblood of business, and are needed to sustain it as well as provide it with resources to fund growth, investment and research. Nevertheless, he believes the desire to “maximize profit for the benefit of shareholders at the expense of other stakeholders is a mistake grounded in the presumption that profits are the ‘be all and end all’.”
Mayer concludes: “Firms must realize that it’s their commitment to corporate purpose, and to those who contribute to creating the common purpose, that will shape their success.”
5. Let everyone have a say
“Corporate purpose – derived and articulated in an inclusive manner and which relates to an employee’s sphere of influence – can help galvanize engagement in a period of radical uncertainty,” argues Lutfey Siddiqi, visiting professor in practice at LSE IDEAS, the London School of Economics’ foreign policy think tank.
The process of articulating purpose is as important as the purpose itself, however. “In order for employees to own and emotionally invest in a company’s ‘Big Why’, it is important that they have contributed to its definition,” observes Siddiqi. “The required depth and rigor of engagement is even greater when the employee base is diverse and dispersed.”
Final thought
Ultimately an organization’s purpose – like other intangible concepts – can be hard to define and almost impossible to measure, especially in light of the social and economic change that we are currently experiencing. Research suggests, however, that purpose-driven companies grow three times faster than their competition and experience 46% greater market share gains than their less purposeful peers. So the pursuit of purpose is definitely worthwhile.
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April 27, 2021 at 02:00PM
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How To Put Purpose Back Into Your Business Strategy - Forbes
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