How to boost your business with a simple question
Why do you do what you do?
It may sound like a philosophical question, but defining a strong, shared purpose for your organisation is much more than an abstract statement. It can create a key advantage in an increasingly fast-paced world, with tangible bottom line benefits.
When former P&G global marketing director Jim Stengel collected 10 years of data across 50,000 brands, he found a direct relationship between a brand’s ability to serve a higher purpose and its financial performance.
Businesses with ‘higher ideals’ – those focused on improving people’s lives – grew three times faster than their competitors. Investing in his resulting ‘Stengel 50’ over that decade would have been 400% more profitable than investing in the S&P 500.
EY, which recently defined its purpose as 'to build a better working world', conducted a global survey of 474 executives with Harvard Business Review Analytic Services. Its report, The Business Case for Purpose, found that while 90% of respondents believe their company understands the importance of purpose, only 46% use purpose to inform strategic and operational decision-making.
Purpose, values and strategy
There is a difference between your ‘universal purpose’ and your mission or strategy. Purpose is your reason for being – and it does not change over time although it may inspire change. Your mission is what you do, your strategy is how you plan to achieve your shorter-term goals – and your values will guide the way that strategy and mission are executed.
EY defines purpose as "an aspirational reason for being that is grounded in humanity and inspires a call to action."1 It is big picture and long term – and it allows an organisation to create value beyond financial metrics.
This is not a new concept – and in more recent years, business leaders have discussed things like triple bottom line, shared value and corporate sustainable responsibility. But the EY survey results highlight we still have some way to go in embedding purpose into strategic decisions.
For 77% of millennial employees, organisational culture is just as important as base salary and benefits.
Does purpose really matter?
According to the results of The Business Case for Purpose, 89% of executives say a strong sense of collective purpose drives employee satisfaction and 80% believe it can help to increase customer loyalty. Importantly, in a time of unprecedented change, 84% say it can affect the ability to transform.
According to the 2015 Virgin Pulse survey, for 77% of millennial employees organisational culture is just as (or even more) important as base salary and benefits.
Having a strong sense of purpose can define that culture. It gives people a clear sense of what their contribution to the company means, and also how they should do things every day. It makes their work feel more meaningful – a key motivator for staff across all generations, because we all have an innate desire to contribute to something bigger.
A clearly defined purpose also makes delegating responsibility simpler as the business grows, because expectations are clear and consistent. And it also makes recruitment and retention much more effective. Employees need to believe in their organisation's purpose, and want to work towards it.
In 2016, LinkedIn named online real estate advertising company REA Group one of the top 25 Australian companies for attracting and keeping top talent, according to its data. In an interview, REA’s executive general manager of People and Culture Barb Hyman said the company’s purpose has evolved to “change the way the world experiences property.”
This has in turn translated into an open and transparent culture. “People connect with our purpose with their hearts and their minds and we know that the best work happens when people care deeply about what they are doing and why,” she said.
In 2012, Edelman’s global goodpurpose study found that 89% of consumers are more likely to buy from companies that support solutions to particular social issues. For more than half, purpose is the most important factor influencing brand choice when quality and price are equal.
For example, Airbnb's purpose is "belong anywhere". It's a refreshing and inspiring purpose with clear benefits for its users, striving to create the kind of warm interpersonal connections that are groundbreaking in its category. Airbnb has grown rapidly and is now valued at $25.5 billion2.
A path to change
If everyone in the business is aligned to a common purpose, they can understand the need for transformation – and this empowers them to embrace it, rather than fear it.
As a ‘guiding light’, purpose becomes the key filter for ideas and decisions.
Google’s purpose has been articulated as “to organise the world’s information, and make it universally accessible and useful” – and this purpose drives its continual innovation in new products, technologies and services.
It’s a purpose with a greater good – giving more people access to information can make a real difference to inequality in the world. And it aligns with the company’s core mantra, which changed from “don’t be evil” to “do the right thing” when the company renamed itself Alphabet.
So how do you define your purpose?
As leadership consultant Simon Sinek informed us in his 2009 TED Talk (now viewed over 29 million times), inspiring leaders ‘start with why’. “People don’t buy what you do, they buy why you do it,” is his mantra, and his golden circle is a useful starting point for defining (or re-defining) purpose.
Perhaps the shining example of this is Apple. Its “Think different” promise, created in 1997 is still relevant today, highlighting the benefits of buying an Apple product. It’s not just a device, it promises authenticity, and to be a mode of self-expression. It’s no coincidence Apple is one of the most recognised and valuable brands in the world.
Creating financial value within the business and addressing relevant society challenges are not mutually exclusive ideas – in fact, this is the underlying concept of shared value.
Once you’ve articulated your purpose, be prepared to walk the talk. If it’s not real or believable, it will inspire cynicism rather than trust. Make sure every person in the organisation is truly committed to it, and align it with performance metrics and rewards.
Ultimately, a shared purpose should create strategic clarity. It allows you to focus on what really matters – and in the process boost productivity, performance, loyalty and the bottom line.