To read more from Rodger, visit HIS BLOG.
Much has been said and written in recent years about the notion of “purpose.” It usually relates to how individuals identify the issues or causes they choose to champion.
When people write personal mission statements, for example, they sometimes wax poetic about plans for using their “true north” values as decision-making guardrails for managing their lives.
Defining “purpose” can also be useful to business enterprises. Although companies are inanimate, they are managed by living, breathing humans who themselves have values they at least profess to follow in making decisions. Those decisions affect employees, customers, clients, and other stakeholders that sometimes number in the thousands or even in the millions.
So, purpose matters. In fact, purpose can be one of those make-a-difference factors in an organization’s vitality and success.
Ranjay Gulati certainly understands that. He’s author of DEEP PURPOSE: The Heart and Soul of High-Performance Companies.
Gulati, who teaches organizational behavior at Harvard Business School, advises companies on how to enhance the growth trajectory of their businesses. His clients range from Abbott Labs and Bank of America to General Mills, Google, Mitsubishi, and Target.
Rodger Dean Duncan: You suggest that the term “purpose” has been hijacked. Tell us what you mean by that, and please explain how you believe we should be thinking about “purpose” now.
Ranjay Gulati: The word purpose has been hijacked by executives who use it mainly as a PR tool to burnish their image. Rather than think deeply about purpose, they deploy it superficially, adopting a high-minded purpose statement so they can appear more virtuous than they really are to their customers, employees and investors.
This attitude reflects a cynical belief that a company’s financial performance will inevitably suffer if it tries to follow through on a meaningful purpose. In fact, just the opposite is true. When companies embed purpose into their day-to-day operations, their long-term financial health actually improves, I have found.
Organizations need to think about purpose as more than just words and statements. They must view purpose as being integral to their operating systems. In this way, purpose becomes a generative force that reaps enormous benefits.
Duncan: You employ the term “purpose washing” to describe companies that use purpose superficially as a form of virtue signaling. What’s a good example of that?
Gulati: Facebook is one company that has repeatedly tried to use purpose washing as a way to distract attention from the harmful effects of some of its practices.
In 2017, Facebook introduced a new purpose statement that said the company existed “to give people the power to build community and bring the world closer together.” Despite this, it continued to allow hate groups, criminals and conspiracy theorists to spread false information across its platforms, resulting in violence and divisiveness around the world. That’s because it was unwilling to give up the advertising dollars that these groups attracted.
The company has made some half-hearted efforts to ban dangerous content from its site, but in the end it has shown that its pursuit of profit is much more important than any attempt to embrace its purpose and what it might stand for. And its brand reputation has suffered as a result.
A more recent example is Spotify that is still dealing with the fiasco of its poor handling of controversies arising from its hosting the Joe Rogan show.
Duncan: When used appropriately, how can purpose help boost a company’s performance?
Gulati: I have found that committing to deep purpose can improve performance in four main ways.
The first is directional. Purpose helps inform strategy and innovation, and can serve as a kind of North Star during times of financial and moral uncertainty.
The second is relational. By behaving with consistency and integrity, a deep-purpose company encourages long-term relationships with its stakeholders.
The third is reputational. A commitment to purpose instills long-term loyalty and trust in customers.
And the fourth is motivational. Employees are much more likely to innovate and excel when they know they are part of a larger purpose.
Duncan: What strategies or actions do deep purpose leaders embrace to achieve superior results?
Gulati: Leaders who adopt deep purpose take a long hard look at their purpose statements, revise them if necessary, and then commit to inlaying their purpose into their daily operating systems.
These leaders also accept that they will sometimes need to make short-term trade-offs in the name of long-term goals. And they make sure that purpose is embedded into their strategy conversations, their recruiting and onboarding efforts, and their branding.
Deep purpose leaders work to align their corporate purpose with the individual goals and priorities of their employees. They conduct a “historical audit” of their organization as a way to align past values with future goals. They devote time to crafting a “Big Story” that resonates with multiple stakeholders. They build purpose into their succession planning, so that it does not disappear when the current CEO leaves. And they deploy purpose with an eye to the legacy that they will leave behind.
Duncan: What role does purpose play in fostering trust and collaboration in an organization’s day-to-day operating culture?
Gulati: Purpose helps build a kind of ecosystem for long-term partnerships with customers, suppliers, investors and others. Trust naturally develops over time as these partners continue to work in tandem, and as a company’s actions (not just its purpose statement) signal that its purpose is central to its being. The partners are motivated to collaborate because of their shared believe in an overarching goal. Clarity of purpose also helps companies steer clear of potential partners who are not aligned with the higher purpose and could therefore disrupt the established ecosystem.
Purpose also has a transcendent effect on employees and company culture. Research has shown that employees are more likely to be motivated and inspired when they feel that they are part of a larger purpose. They are more willing to collaborate on challenging projects when they know the result will yield not only financial benefits for the company but also societal benefits. Purpose serves as a kind of “moral glue” that binds workers together. I speak of the deep purpose organizations as akin to “moral communities” where members are tied together by a shared ideal.
Right now, companies that have committed to purpose are having a much easier time retaining and recruiting employees, as the pandemic has caused more people to search for greater meaning in their lives. Younger workers in particular want a job that aligns with their personal values and beliefs, and the so-called “Great Resignation” has shown that many of them no longer want to work for companies that focus only on financial success. I personally believe that this is more like the “Great Rethink” in which people are contemplating their lives and the role of work in their lives. As a result, they expect more of their place of work. And those who deliver will win the war for talent.
Duncan: You talk about “purpose drift.” What exactly is that, and how can leaders avoid it?
Gulati: Purpose drift occurs when leaders start to take purpose for granted and no longer embrace it as a fundamental operating system and compass. Instead, it becomes more like wallpaper that everyone looks at but doesn’t let it influence them in any way. I believe purpose drift was at play when Boeing introduced its 737 Max aircraft, which were found to possess flaws that contributed to two deadly crashes. It appeared that the company had become so focused on its financial targets that it lost sight of its longstanding dedication to scientific progress and safety.
Leaders must realize that purpose needs constant upkeep, or else it will naturally decay. They must foster accountability by conducting regular purpose check-ins with their teams, and establishing metrics when possible to ensure that purpose is a daily presence in both large and small decisions.
Duncan: You tell the compelling story of LEGO, a company that experienced an impressive transformation when its people decided to “fly forward by looking backward.” Please give us the short version of that story, then tell us what leaders in other companies can learn from the LEGO example.
Gulati: When LEGO was struggling in 2004, the CEO decided to immerse himself in the company’s history. Understanding why the company was formed in 1932 helped him simplify the company’s product line, reduce inefficiencies and spur innovation. His key point was that you don’t invent a purpose for an established firm like LEGO, you “detect” it. And to do so, you must look into its past and its foundational story. But at the same time you need to connect the past to its future.
The original founder of LEGO had been dedicated to helping children learn and grow through play, and his motto was: “Only the best is good enough.” The new CEO applied this motto to all aspects of the company, not to force unrealistic ideals of perfection but to encourage a constant striving to create better products. The strategy worked, and the company’s profits soared.
LEGO’s story shows that by looking into the past, leaders can help their companies move forward. Distilling a company’s essence in this way can galvanize employees and create lasting connections with other stakeholders
Duncan: What specific skill sets are most helpful to leaders who want to lead with focused purpose?
Gulati: Deep purpose leaders must be outstanding storytellers. If they can build a compelling narrative around the founding and growth of their company, they will be able to captivate their customers, their employees and other stakeholders. As was the case with LEGO, delving into a company’s long history can be an enormous help in this effort. But even newer companies can mine their origin stories for narratives that crystallize their reason for being. At the same time that they look backwards they must look forward as well and the purpose needs to provide a crystallization of an envisioned future.
A narrative is especially powerful if the CEO can connect his or her personal story to the larger mission of the company. An example: The chief executive of Livongo, which was created to help people with diabetes monitor their blood sugar levels, has a son with the condition. Employees and others were inspired by his story. The firm was able to attract top talent because many of its employees also had a personal connection to diabetes.
Communication skills must extend beyond storytelling. Deep purpose leaders must also clearly explain the social and commercial logics behind their purpose-based decisions when certain stakeholders suffer short-term losses in the service of a longer-term goal. And they must be committed to establishing and communicating metrics that demonstrate how purpose is advancing the company’s multidimensional goals.
Duncan: You have identified three levels of convenient purpose that companies pursue, only to ignore them when the going gets tough. What are they?
Gulati: The first and the worst kind of convenient purpose is what I call purpose-as-disguise. This is when a company uses its purpose statement as a way to conceal wrongdoing. Theranos and Enron are examples of companies that misused purpose in this way. Elizabeth Holmes, the onetime CEO of Theranos, asserted that her company’s purpose was “to facilitate the early detection and prevention of disease and to empower people everywhere to live their best lives.” Recently she was convicted on four counts of fraud.
The second, and much less nefarious, type of convenient purpose is what I call purpose-on-the-periphery. Companies employ this method when they become active in a cause that is identified in their purpose statement, but do little or nothing to embed the cause in their actual day-to-day operations. These companies show by their daily actions that they prize shareholder value above all else.
Then there are the companies that adopt purpose-as-win-win. The leaders of these organizations truly want to practice what they preach in their purpose statements, but they mistakenly believe that they can do well financially and help society at all times. However, when push comes to shove, as it inevitably does, they always choose shareholder value over societal good.
The leaders who commit to deep purpose understand that sometimes their overarching goals will be inconvenient to their organizations. But by allowing their purpose to guide them through difficult times, they know they will ultimately come out ahead, both financially and in ways that will leave a lasting impact on society.
Duncan: While supporting progressive ideology in the U.S., BlackRock—the American multinational investment management firm headed by Larry Fink (who wrote the foreword to your book)—is reported to be sending billions of U.S. investment dollars to China. Many investors have serious concerns about China on issues ranging from human rights violations to national security interests. How do BlackRock’s China investment practices square with the principles you advocate in your book?
Gulati: None of the principles in Deep Purpose should lead people to conclude that they must agree with every action that a purpose-driven company takes. Even the best purpose-driven companies will find that some stakeholders (and certainly some perennial critics) will disagree with a particular action. Deep Purpose is not about policing every decision a company makes. It’s about making Purpose core to the operating model and culture of companies.
I don’t know the details of BlackRock’s investments in China, or any other country for that matter. If BlackRock’s purpose entails including more people in the benefits of investment—including retirement—then I suspect they would see its actions simply as a fulfillment of its purpose.
This column was first published by Forbes, where Dr. Duncan is a regular contributor.