Ensuring your organisation has a clear purpose enhances its chances of being profitable. The latest McKinsey Quarterly includes a fascinating article (read it here) that highlights how important it is for organisations to have a clear purpose.
The article includes an honest reflection on the difficulty of balancing the tensions between the having a worthwhile purpose, maintaining a profitable stance, and looking after the interests of a diverse range of stakeholders. However, their research also indicates hat most stakeholders feel that organisations should have a purpose, beyond that of wealth. However, where an organisation has a stated purpose, but is not perceived to be living up to it, then the purpose gap can be detrimental to the health of the organisation.
To help bridge the purpose, gap, the article advocates embarking on a process to discover the entities purpose, and then align all aspects of the organisation with this. There are four steps proposed:
- Get real: Create a baseline form your stakeholders’ perspectives
That is, stakeholders want to see the reality of the purpose lived out, not just read about it in some report. This also means you may need to put aside your own perceptions and adopt those of your stakeholders. - Connect purpose with your company’s ‘superpower’
Companies that know their purpose have a superpower. The article sites a lot of research (over 2000 academic papers) that validates purpose led companies achieve higher returns than the average. Some of the reasons for this include having more loyal customers, implementing more efficient energy and water practices, and unleashing the potential of fully engaged employees. In this process, it is the leader who needs to ensure the link to purpose is embedded into the company’s core. - Organize to keep purpose at the top of everyone’s mind, every day.
That is, the building blocks of the organisation are embedded with purpose, and exude it in everything they do and every interaction they have. The company culture is the purpose of the entity. This means leaders need to be open to hearing what is happening, including when it is not good news. - Measure what you can, and learn from what you measure.
Determine what the best metrics are to reflet the impact of your purpose. Ask what evidence is need to understand the impact. Also think about what is not currently being measured that society might hold you accountable for in the future.
However, being a leader in such circumstances is a double-edged sword, as you may be achieving in all areas, but if you are perceived as being inauthentic, and not true to the entities purpose, it will be a whole lot of trouble. As the article notes, “to be authentic, you must be unrelenting in elevating and stimulating debate about uncomfortable truths and tensions you may be tempted to sweep under the rug’.
The role of your organisation is much more than just making money. Determine your purpose, hold true to it, and make a difference in the word.