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From purpose-driven companies to those that live their purpose

18/03/2021

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Expansion

Álvaro Lleó

teacher of Tecnun

Carlos Rey |

Director of the Chair of Management by Missions and Corporate Purpose of the International University of Catalonia

Nuria Chinchilla

Professor at IESE Business School

Larry Fink's letter, the Business Roundtable declaration and the Davos manifesto are milestones that call for the need to generate broader management models that are capable of creating value for all stakeholders and not only for shareholders. Today we are calling for human organisations that go beyond maximising profit. Profitable organisations, of course, but ones that are capable of providing solutions to the problems of people and the planet and that do not make a profit without worrying about how they make an impact.

Clarifying, through purpose, the contribution that an organisation makes to its different stakeholders seems to be key to generating trust, creating links and being sustainable over time. Various studies show how purpose has a positive impact on individual commitment, collective unity, productivity, profits, reputation and investment attraction. Therefore, the interest generated around purpose is no coincidence. However, it is not enough to define a purpose. It is one thing to have a purpose and quite another to live it, and the transition from the former to the latter is neither obvious nor automatic. This is why we argue that the key to purpose lies in its implementation.

More than three years ago we started a research project in which professors from Tecnun-University of Navarra, the International University of Catalonia, IESE Business School and professionals from DPMC worked together to generate knowledge that helps organisations to effectively implement their purpose. Thanks to the Purpose Strength Model we evaluate the degree of implementation of purpose in different organisations and we are generating a data observatory with which to carry out evidence-based research.

We have analysed nearly 50 companies, from six different countries, that have been working on purpose for some time under the mission-driven management methodology, a methodology of deploying purpose through missions at different levels of the organisation (departments, teams and individuals).

A common denominator of these companies is that they have put a lot of effort and energy into working on three elements: defining purpose and aligning it with strategy, developing a new leadership style and redesigning management systems.

Mission-driven companies spend time reflecting on what contributions they want to make to society and their various stakeholders (missions), aligning them with the business model, making them known and explaining them clearly to all members of the organisation. Defining and making the purpose known through the missions is the first step and, as a result, incorporating the following filter into decision-making: "What impact does this decision have on the company's purpose and missions? How does it contribute to its development?

Distributing leadership

In addition, the organisations we have studied have a unique leadership style. One that is able to distribute leadership throughout the organisation, a leadership that generates leadership. It is striking how they see employees as leaders, not just subordinates. They try to ensure that the purpose is common and shared, and that people identify with it. They take special care to build trusting relationships and have transformative conversations with each employee, helping them to think about and connect their personal values with those of the organisation. When this happens, a huge source of energy is created in which the purpose of the company and the personal purpose of those who work there are connected. The purpose ceases to be "someone else's" and becomes one's own. And it is when purpose is shared that delegation and autonomy are enhanced. As one manager once said, "worry about them understanding the why and let them surprise you with the how".

Mission-driven companies are working on their management systems so that purpose and objectives go hand in hand. On the one hand, the purpose must become part of day-to-day business so that it does not remain a mere slogan that appears on the website. On the other hand, it is necessary to rethink how everything is oriented towards the development of the purpose: selection and recruitment, compensation and incentives, career plans, training and talent development, organisational design... everything must be aligned with the purpose and facilitate its development.

The key to purpose is its implementation. Effective implementation depends on the degree of consistency in the organisation: the degree to which everything emerges and is geared to the development of the purpose. This triad - strategy, leadership and management systems - is key to achieving it. We have evidence that when the purpose is consistently implemented the commitment of workers is multiplied. How to achieve a good implementation of the purpose in your organisation? There will probably be many ways, some better than others, but we make two practical recommendations. The first is to measure the degree of implementation of the purpose. Measuring allows us to know the reality of the organisation in order to be able to improve it, and improvement is essential in any organisation. The second is to have a methodology for deploying the purpose. Our data validate that mission-driven management is an effective methodology for implementing and deploying purpose in the organisation.

Purpose has the power to leverage the interests of all stakeholders in unison and the great challenge for those of us who research these issues is to help organisations to effectively implement their own purpose.