High performing business: the what & why of purpose
by Adam Woodhall—“The two most important days in your life are the day you are born and the day you find out why,” Mark Twain. Can business be purposeful and successful? That was the fascinating question explored at a recent event, “Purpose & Performance,” where four leading academics considered the evidence. The conclusions: the concept is still a work in progress, but there now exists clear qualitative and quantitative data that purpose can drive profit.
Held in the shadow of St Paul’s Cathedral at the offices of law firm K&L Gates, the packed event was hosted by Blueprint for Better Business, with Charles Wookey, their CEO, introducing the meeting. Wookey opened with an optimistic observation that there is much more to what makes business tick than individual self-interest, status and money. He suggested that the quality of relationships, represented by respect and co-creation, is also key, with a great chance for the dominant narrative of self-interest to change. Of course, many of us would agree, but as we were reminded by the chair for the night, Andrew Hill of the FT, the reason why Wookey and Blueprint chose to convene this event is to share the emerging proof points which back this up.
What is purpose?
What is purpose in a business context, though? Dr Victoria Hurth of Plymouth University Business School revealed that the feedback from interviews with 14 senior executives from large companies who had begun their purpose journey focused on the ‘Why’: why the firm exists, why it does what it does, why it deserves to exist. Purpose was seen as the sweet spot between social and financial impact.
All the large businesses, which included BT, Easyjet, Interserve, M&S, PwC and Vodafone, were observed to be at the start of their purpose journey. Crucially, it was seen as being tangibly different from CSR. This is a good thing on a number of levels as Professor Helen Alford observed. She argued that CSR as a concept has been hollowed out, and that it is important to guard against purpose suffering the same fate. Another view on CSR came from Professor Ionnnis Ioannou of London Business School who suggested that CSR is still in its infancy and like an infant, is generating a lot of random activity and noise.
Returning to Dr Hurth’s findings, the conversation revealed widespread agreement that purpose is a journey requiring a whole organisation approach. It takes time, requires brave and vulnerable leadership from the top, is not easy and endures across any particular leadership team. Furthermore, it was middle management that was seen by many as both critical to the journey but the most difficult to engage.
The hard evidence
Where is the hard evidence though, for the value of a purpose-led organisation? This was provided by Professor Alex Edmans of London Business School. He focused in one area of purpose where there is considerable data; employee engagement. He spent four years crunching numbers and challenging assumptions, and eventually came up with an eye opening conclusion. This was that the ‘100 Best Companies to Work for in America’ beat their peers by 2-3% over 1984-2009 in stock returns, leading to a significant 84-150% advantage compounded over the 28 years of the study.
Professor Edmans was clear that it is key for companies to take long-term views, for example, tying CEO stock incentives to results after they have left the business. Additionally, he believed that purpose provides a real opportunity for investors. This is because many investors are ignoring purpose as a valuable KPI. This means purposeful companies are often undervalued and therefore provide excellent longer-term investments.
Archimedes taught a great lesson, Professor Alford, reminded us: ‘Give me a fulcrum and I can move the world’. She proposed that the future of purpose is as a real lever of change for business. Academics are sometimes accused of living in ivory towers. However, these four speakers demonstrated they had located the lively pulse of purpose in action in business and how it can drive performance.