contributor, korn ferry institute
This Week in Leadership
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Daniel Goleman, author of the bestseller “Emotional Intelligence,” is a regular contributor to Korn Ferry. His latest book, "Altered Traits: Science Reveals How Meditation Changes Your Mind, Brain, and Body," is available now.
It’s been months since the Business Roundtable issued its “Statement on the Purpose of a Corporation,” gathering the signatures of nearly 200 CEOs from companies, including Amazon, Apple, and General Motors. A significant milestone in the purpose movement, the statement encourages organizations to "move away from shareholder primacy," a concept that had existed in the group's principles since 1997.
But now the question becomes how will organizations turn their purpose-oriented aspirations into business results? What does it take to transform a name on a page into a truly purpose-driven organization?
While it’s been shown that companies with high levels of purpose grow faster, have higher profitability and outperform the market by 5%–7% per year, there appears to be a nuance to the purpose equals profit equation. Using a proprietary survey from the Great Place To Work (GPTW) Institute—which asks employees across all levels within hundreds of organizations to rate their employers on a variety of workplace variables related to trust, pride, and camaraderie—researchers from Harvard, Columbia, and University of Pennsylvania confirmed that in order for purpose to drive financial performance, organizations have to do far more than proclaim their values.
The team performed a factor analysis on a sample of 429 U.S. companies, based on more than 450,000 responses, allowing them to see how a sense of purpose interacts with various metrics, including profitability. They looked at purpose-related statements such as “My work has special meaning: this is not just a job;” “I feel good about the ways we contribute to the community;” and “When I look at what we accomplish, I feel a sense of pride.”
The analysis revealed two types of purpose-driven organizations: high Purpose-Camaraderie organizations and high Purpose-Clarity organizations. The first are companies where a strong sense of meaning meets a strong sense of fun, family, and teamwork. These are environments where employees not only take pride in what they do, but also feel like they are in it together. High Purpose-Clarity organizations are companies that score high not only on purpose but also on dimensions of management clarity (e.g. “Management makes its expectations clear:” “Management has a clear view of where the organization is going and how to get there”), environments where people take pride in what they do and understand how the purpose is best achieved.
Looking to financial health, it was the Purpose-Clarity organizations that consistently demonstrated superior fiscal performance. A firm’s performance was inevitably stronger when its employees perceived their leaders as trustworthy, honest, and ethical. This echoes what most savvy employees already know: that putting words like “respect” and “community” on a desk cube isn’t enough to move the needle over the long term.
But creating and sustaining Purpose-Clarity isn’t just the job of executives. While the C-Suite might set the strategic purpose, it takes middle management and professional workers to keep the ball moving down the field. These layers of leadership must buy in as they make daily decisions that align to the greater objective. Middle managers play a major role in creating a high-trust environment and helping employees at all levels connect the dots between their daily work and the bigger picture.
An example of this comes from Howard Shultz, the founder of Starbucks. To turn the company around in 2008, he went against the advice of his shareholders, taking 10,000 of his middle managers to New Orleans for a multi-day immersion into the company’s purpose.
“I knew that if I could remind people of our character and values, we could make a difference,” he told the Harvard Business Review. The conference kicked off with community service, engaging employees throughout the week in contributing more than 54,000 volunteer hours and investing more than $1 million in local projects across New Orleans.
“The conference,” Schulz added, “was about galvanizing the entire leadership of the company—being vulnerable and transparent with our employees about how desperate the situation was, and how we had to understand that everyone must be personally accountable and responsible for the outcome of every single customer interaction.”
For companies to move beyond the rhetoric of purpose, then, it will take clear communication, middle management engagement, and a healthy dose of going against the grain of old habits.
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