By Blair Taylor, Accenture
The number and frequency of conversations around corporate Purpose have recently reached a fever pitch. Although interest in Purpose and its role in corporate organizations has arguably never been greater, we lack a clear definition of what exactly Purpose means, how to measure it and its potential impact on a company’s bottom line. Is Purpose different from a mission statement? How does it sit alongside and complement approaches to DE&I or ESG? Does financial performance fit into the definition of Purpose?
It’s time to take steps toward the creation of a unified definition of Purpose—one that will help organizations clarify their own Purpose, measure themselves and their competitors, and understand the most efficient and effective ways to improve their corporate Purpose for the years to come.
Simply put, “Corporate Purpose” delineates and defines the reasons why a company exists, in addition to generating profit. It is measured by the people and communities the organization impacts internally and externally and is therefore a far more meaningful measure than reputation, brand, or ESG score alone. Because Purpose is much broader than these singular measures, its impact is also multiplied. Purpose includes and incorporates community impact, environmental, social and governance (ESG), diversity, equity, and inclusion (DEI) policies, corporate social responsibility (CSR), brand reputation, corporate governance, financial performance, and even employee engagement. On arguably its most distilled level, Purpose captures the ability of a company to “do good” while also “doing well”. In many respects, Purpose can buttress reputation, serving as a backstop that helps companies weather storms when crises arise. Companies built on Purpose will be more resilient in the face of a crisis because they have established a credible track record of meaningful intent with the people and communities with whom they engage.
In the late 1990s, companies began to realize that intangible assets like brand and reputation were among the most valuable aspects of an organization. Brand management and reputation measurement became cottage industries, as firms rushed to get a handle on how these important intangibles were influencing their valuations, both from a public perception standpoint and in terms of the company’s annual revenue. Early attempts to quantify brand and reputation grew out of a social science-based world view and were therefore measured in that framework. Specifically, brand and reputation have historically been measured using survey data and recording perceptions from different stakeholder groups inside and outside of the organization. C-suite perceptions, and to a lesser extent, financial performance, have also been used as a proxy for brand reputation.
With the publication of the Business Roundtable’s 2019 statement on “The Purpose of a corporation”, of which Accenture is a signatory, Purpose has now become a dominant asset of interest. More and more companies have value statements around Purpose. Many have hired Chief Purpose Officers, dedicating significant time and energy to measuring and monitoring their performance around Purpose.
Companies often define themselves by their industry, drawing comparisons with peers pursuing similar goals or taking pride in being labeled an “industry leader.” But it’s time to rethink this traditional definition and focus instead on becoming a Purpose-lead organization. Indeed, elevating the corporate identity of a company beyond their industry specific identity to a more global aspiration couched in humanity has helped set apart some of the most Purpose driven organizations in the world from their competition. To be clear, the aspirational statements alone are never enough to claim Purpose. The differentiator that these Purpose driven companies all have in common lies in their authenticity: They do precisely what they say they will do; they show that they care for the things they claim to care about. They invest significantly in local communities, create a diverse workforce, and give employees a chance to align their personal values with those of the larger organization. A set of Purpose driven actions can create a global juggernaut of impact that just happens to have an industry specific role that enables it all to happen.
So, how can a company transform itself into a Purpose-driven organization in the present in order to optimize its impact in the future?
There are at least three key steps to consider in the process:
First, recognize that lip service is no longer sufficient. A great PR campaign might build reputation in the short-term, but only Purposeful intent coupled with quantifiable impact can build true Purpose. In a world where data is more and more readily available to all, and where consumers are acutely aware of the actions taken by the corporations they care about, vacuous statements without tangible focus and measurable results will convince no one. Net zero commitments look great on paper, but who will be accountable if these commitments fall flat thirty years hence in 2050? Purpose-driven environmental commitments include measurable short-term action and a clear roadmap to fulfilling longer-term, future commitments.
Second, competitive benchmarking can help companies understand where there is the most work to do. The competitive landscape is dynamic and the attributes that differentiate the most Purpose-driven companies from their competition change and fluctuate based upon what your company may do AND on what your competitors are doing. For example, the scientific models used at MAHA Global are based on the evolutionary principles of biological adaptation. Adaptation is the process of becoming better matched to one’s competitive environment. Analyses reveal which combinations of attributes work well together to make some individuals better competitors than others. The same principle can be used to understand how corporations become better competitors. MAHA analyzes a proprietary dataset that spans all the components of Purpose described above. Analyzing data collected for nearly every publicly traded company in the world over the last 8 years provides a unique ability to understand which aspects of Purpose have the biggest impact on your organization relative to the competition. As competitive landscapes change, whether at the level of industry, geography, or the world’s overall best competitors, this information can help a company predict how specific Purpose-led actions will impact your overall performance. Companies that demonstrate Purpose have been shown to outperform the market by 5-7%. [Source: https://hbr.org/2019/08/181-top-ceos-have-realized-companies-need-a-Purpose-beyond-profit]
Finally, implementing and then continually monitoring and adjusting your organization’s authentic policy changes will help an organization stay abreast of what is resonating across stakeholders. This, in turn, will help you to appropriately refine your Purpose commitments.
Whereas corporate reputation is largely the result of voices from the outside looking in, corporate Purpose blends these outside voices with the internal voices looking out. When these internal and external sentiments align, you will know that your organization has adapted to its most authentic self. As people rethink their sense of Purpose, they expect businesses to align with their values and to address the bigger problems they see in their lives and the world at large. Companies that take a narrow view of their role in society and the marketplace miss the opportunity to provide solutions to unmet needs—and reap the resulting profits. Those that don’t broaden their mission around social, environmental, economic, and other values put their relevance at risk.