How Purpose Drives Performance in Organisations
Helping senior leadership teams and executives to lead ‘with a sense of responsibility for the whole’ has been our essential purpose for more than two decades.So, it’s pleasing to see that ‘Purpose- driven business’ has become a monumental movement.
What does Purpose-Driven mean?
There’s certainly no shortage of buzzwords to describe it – social enterprises, organizations and conscious capitalism, to name a few. Is it more than the latest flavor of the month, fad or corporate “frisbee”? First, let’s explain what we mean – the duty of a business doesn’t stop at generating profit for its shareholders. Businesses don’t operate in a vacuum, they are an integral part of our society, and like any other member of a society, they are responsible for supporting and contributing towards it. Evidence shows that, in the long term, the consistently best-performing businesses go beyond profit maximization – they serve a purpose greater than their own self-interest. They act with conscious awareness of the interests of society, the communities they live in, the people who work for them and the planet as a whole.
To be credible, this intention has to flow from the top down and the inside out. For purpose to be authentic, it must flow from the place of origin – this means from ‘inside’ the leaders themselves, usually from the founder or founding group. It must be fully embraced by the top leadership team and understood by every employee. The only way for corporate leaders to become authentically ‘purpose driven’ is to begin with a deep reflection on their individual purpose, values & vision.
Our core methodologies, including the self- managing leadership, strategic focusing all follows this “the inside out” process.You will never be perceived as a credible purpose driven company by just jumping on a buzzword as a result of researching the market to find out what customers want to buy. As Abe Lincoln said, ‘character is the tree, reputation is the shadow.’ It isn’t about marketing or PR, to be purpose driven means that you are clear and focused on who you are, your character and what gives meaning to your life and work.
We ask our clients three big questions to guide the conversations that lead to becoming an authentic purpose driven business:
1) Why are you in business? This involves some variation of maximizing benefit beyond their self-interests
2) How do you run your business? This means having an intentionally positive impact on people, the society, and planet.
3) What does your business offer? What products or services do you provide that serve a purpose beyond your profits?
Above: Oxford Leadership’ Chairman in Telegraph Interview discussing the importance and role of Purpose in todays organisations
The evidence is undeniable, purpose drives performance
Purpose-driven businesses obviously benefit society, but does character pay? Do purpose-driven companies benefit shareholders? The evidence that they do is overwhelming.
Fred Kiel at KRW international interviewed 84 CEOs and their executive teams in depth (while also doing a poll on 8,600 employees). The goal: to find the connection, if any, between the “character” of a leader and an organisation’s performance. This was the first major study to show a measurable relationship between CEO character and business success. The results revealed that CEOs who rated high on authentic purpose & values (referred to as virtuosos) achieved a 9.35 percent return on assets (defined as net operating income as a proportion of total assets), while those tagged as self-focused scored just a 1.93 percent, over a two-year period. The research showed that the companies run by the virtuosos at the top end of the curve performed more than five times as well as those run by self-focused execs at the bottom end of the curve.
Deloitte’s chairman, Punit R, asserts that “to generate extraordinary profits, you must first have a focus that is beyond profits.” It’s clear that the leaders of big businesses are beginning to pay attention. Litterateur such as Joey Reiman’s ‘the story of Purpose’ and Roy M Spence’s ‘it’s not what you sell, it’s what you stand for,’ is becoming increasingly popular, and remarkably ‘the Purpose Driven life’ by Rick Warren remains the second most translated book in the world! Simon Sinek’s TED talk “Start with Why” has had over 23 million views.
The trend is undeniable – purpose drives performance. The idea of big businesses driven by a purpose beyond their products, profits, and ego is no longer a utopian vision – it’s becoming a reality.
That’s why Oxford Leadership is deepening and accelerating our commitment to ‘Transforming Business for Good!