It’s no longer a debate. Purpose-driven = improved performance. Whether you read my last post (link to prior post), reviewed recent studies or read the Economics of Higher Purpose, you should know that Purpose can decrease moral hazard, lower costs, and drive sustainable top and bottom line growth. The underlying drivers, the economics of Purpose if you will, aren’t fads. They’re simply science.
So What? Now what? How do you activate, embed and align behind Purpose to drive sustainable results? Over 20 years, I’ve operated, executed and driven outstanding results as a Purpose-driven owner/President, Consultant and Fortune 500 Manager. What I’m sharing here are key philosophical underpinnings that allowed me to drive success in each situation - and can you help do the same. In the workshops I do, we flesh out even more practical and specific ideas to make Purpose practical and drive results from it.
Design it In. Purpose needs to be Integrated, not separate: People often see Purpose as something separate from Strategy, Goals and Objectives. It isn’t. It’s the driver of those activities. Those organizations that embed Purpose in everything they do, particularly their planning and control cycles, achieve remarkably better results. Purpose isn’t a project, it’s the underpinning of how you do business. Purpose isn’t soft and ethereal. It’s something that can be planned and controlled just as you do goals and objectives. In the organizations I’ve worked with, a key way of doing this is making each person explain how his or her goals and objectives tie to the organization’s Purpose.
Live it by building it in to Decision Making, Planning and Control Cycles. Purpose creates different investment criteria and investment time horizons. It creates new ways to evaluate opportunities and people. But, it only does it if you live it, believe it and see value in the journey. If you do, you’ll build your Purpose in to your planning and control cycles, your goals and objectives and your performance reviews. Perhaps you’ll give bonuses based on Purpose. The most successful organizations I’ve worked with make part of the executive’s bonus contingent upon achieving the organization’s Purpose. They measure Purpose and include those measurements in regular executive meetings and insure all employees have a portion of their annual review based on alignment with the organization’s Purpose.
Make Purpose Visible. Purpose isn’t a once a year activity. If you’ve designed it in to your decision making as well as planning and control cycles, you’ve made a great start. Go further - build it in to everything you do. Measure it. Create a Net Purpose score. Treat Purpose just like you would any other major driver of your business. Talk about it. Have one person at each staff meeting talk about what the organization means to you. As the CEO or Senior Leader, take Purpose GEMBA walks and ask four key questions: Do you know the organization’s Purpose? Do you know how your job helps the organization achieve it? What’s your (the employee’s) Purpose? How can the organization help you achieve it? The most successful ones make Purpose visible through employee engagement sessions. They insure Purpose is talked about at every staff meeting. They make sure it is in planning and control cycles. They utilize omni-channel communication strategies to insure it remains at the heart of all communications.
Make Communications Visceral. Make them Personal. Part of the impact of Purpose-driven leadership comes from its ability to tap in to emotions. The neocortex is responsible for processing facts and figures and driving our rationale decision making, but it doesn’t drive behavior. Behavior is driven by the limbic brain. The limbic brain is driven by feelings and emotions. So if you want to drive behavior, don’t forget that feelings and emotions matter. You don’t need to be a “cheerleader,” or inauthentic to your leadership style to make this work. You need to do two things well. Care and connect. If you care about the people you work with you’ll naturally drive feelings and emotions that drive behavior. If you help employees connect with their Purpose and the organization’s Purpose, you’ll do what articles in the Harvard Business Review and studies from leading behavioral scientists have concluded is fundamentally one of the most important things you can do to drive performance. Remember the Gemba walks I mentioned earlier? They’re a great way to do both. Sharing a personal story of what’s important to you? They can be spine tingle inducing for your employees who didn’t know you before. Sharing your vision for what happens when you achieve the organization’s purpose and helping them touch and feel the outcomes? Motivating!
Purpose isn’t soft or ethereal. It’s specific, tangible and drives superior performance. Looking for even more information on these principles? I talked about them at a keynote address, which I’ve broken in to two minute increments. Or, this HBR article has a slew of specific ideas that drive outcomes - I can vouch for them from firsthand experience. Looking for more? Try 6 Ways to Embed Purpose as a Drive of Value. Or, feel free to reach out. I’ve got a bushel basket full of practices, both my own and those others have shared with me.
Performance through Purpose isn’t a mystery. It’s a journey that’s exceptionally rewarding.
This article is for the right brained, finance driven, those who want to understand the economics of Purpose-driven or are looking to convince others of Purpose’s benefits. It’s also for those that want to learn how to mitigate risk, decrease moral hazard, improve employee productivity and contain costs.
For 20-years, as an owner operator, consultant and Fortune 500 Manager, I’ve experienced the benefits of being purpose-driven first hand. They include:
1) The ability to drive sustainable top line sales growth, both 1x new sales and year over year same customer increases.
2) Dramatic bottom line increases driven by sustainable (year-over-year) cost containment.
3) Reduced labor costs.
4) Higher long-term return on investment.
As purpose-driven has become the rage, anecdotal stories raged. But, we’ve fundamentally been lacking a rigorous, systematic view of the underlying economics, the science behind Purpose-driven, if you will. What I observed, which has now been fundamentally proven out by Finance and Economics, (see below for highly rigorous economic study), are the following economic truths.
1) Purpose driven creates sustainable value at a rate higher than traditional enterprises achieve. This occurs because both because of the time horizon purpose-driven investors are willing to follow and dollar values they’re willing to allocate. Fundamentally, purpose-driven investors see value in the journey unto itself. When you see a journey having value, you invest more and over longer time horizons, because there is value, you’re seeing aside from traditional economic metrics that cause you to invest more. When harnessed properly, those investments create sustainable value at a rate higher than traditional enterprise achieve.
2) Purpose-driven investors may invest when others wouldn’t creating real value (real options if you will) for themselves and others. What? A purpose-driven investor sees value even when economic value may not appear to others. They’ll seed technologies and ideas for the benefit of the idea, technology or the benefit the world will receive. That investment creates value: information, a product, a technology that they or others can harvest. In simple terms, what if no purpose-driven investor had seeded the technology to get men to the moon? How much value/industries was created as a result of it? What would have happened if the initial investor had harvested the value of the investment? How about the Internet? A purpose-driven investment can fundamentally create real value for the initial investor and others.
3) Purpose-driven investors innovate faster, respond to challenges faster and contain costs better. Typically, purpose-driven investors pursue more holistic thinking and with their activities with great passion. The journey matters. So, losing it is a problem. This can, in very practical terms, create substantial economic value. In my own experiences, we literally dropped the price of our COGS year-over-year as a result of being purpose-driven. Why? We challenged more assumptions, saw sustainability and design as a lever for change and used holistic thinking to drive change we wouldn’t have otherwise. The result? Costs were contained. Why? We believed in what we were doing and if we didn’t do that, we’d lose the opportunity to do it. Is it a new phenomenon that a concept can fundamentally challenge our economic paradigm and create value and contain costs? No. In many ways Purpose-driven mimics the quality movement. It was a paradigm shift to consider that paying more up-front for quality could create significantly decreased costs. There was huge resistance to the idea. We all know that to be true today. Purpose-driven is the same.
4) Labor costs are lower when you’re purpose-driven. The fundamental economic paradigm, that we as humans exclusively pursue that which maximizes economic value is wrong. You see if every day. Other things, meaning, safety, self esteem all have value. Fundamentally, this is what creates lower labor costs when your purpose-driven. People work for less because they obtain other value, including the experience of the journey, from being purpose-driven. Now, go a step further, when your labor costs are lower, your investment hurdles are lower. When you’re investment hurdles are lower you can invest more over longer horizons and still see great outcomes.
So what, now what? If you want to learn more in more rigorous, economic driven terms, read The Economics of Higher Purpose. It lays out in a systematic, objective and rigorous way, the economics of Higher Purpose. If you’re interested in the tools and techniques to drive economic value through a purpose-driven approach, stay tuned. I’ll be expanding on the philosophies, tools and frameworks shared in this keynote address, that I’ve used over the last 20-years, in my next article.
If you are right brained, finance driven and wanted to understand the economics of Purpose-driven or are looking to convince others of Purpose’s benefits, this is the article for you.
You've got a Mission. You've defined your Values. But, you've seen the research: Purpose-driven companies out perform their peers on 7 out of 8 categories AND return stock appreciation of 1681% to 118%. If you’re like the Executives I work with, the thought of "another retreat" to define your Purpose makes your eyes water and may elicit the muttering of phrases you don't want children to hear. “So I get it, Purpose Matters, now what?”
From Mission to Purpose with the 5 Why Exercise
In Lean (The Toyota Way), the Five Whys exercise was codified as a technique to help people find root cause, the real source of a problem. The essence? If you start with what you’re seeing and ask yourself Why? five times (on average), you get to the root cause (the real reason for the problem). The technique, beautiful in its simplicity, is one I've used with remarkable success to speed up the process of Purpose articulation for those who already have well-defined Mission statements. Why? Most people define their mission in terms of WHAT they do. If you ask yourself Why? several times, you get to the heart of Why you do it – your cause – and have the potential to inspire your stakeholders. Better yet, I find it only takes 2-3 Whys when working from a well-crafted Mission Statement. Let's give it a try.
Imagine yourself in the Board Room. State your Mission: "To empower CEOs to articulate, activate and actualize their Purpose." Ask yourself, Why do we do that? "Because I believe purpose-driven companies outperform their competitors AND create a better world." Repeat a variation of that question, Why does that matter? "Because I'd like to create a world my son and his kids would be inspired to live in, and purpose-driven companies can do that." Repeat a variation of that question, Why do that with business leaders? “Because I believe business is one of the dominant institutions in society - the one most likely to create change - and I've seen the impact articulating, activating and actualizing purpose can have for individuals and organizations. I’m excited to wake up every morning and work on that.”
Three Whys and we can move from Purpose to Mission
"To positively impact the next 7 generations by empowering leaders to activate, articulate and actualize their Purpose." It, as Simon Sinek would say, "starts with our Why." It is a shared journey that we (the organization) do with our clients, not for the clients. It is aspirational. It is inspiring. It is a never-ending pursuit. It creates an entirely different conversation with our Who, our customers. If you’ve thought deeply and invested heavily in your Mission, well done! You’re one step closer to articulating your Purpose. Try the 5 Why exercise to move from What to Why and articulate your Purpose.
The voice and stories from this blog originate from the collective wisdom and experiences not just of our team, but with those we were fortunate to learn from.