Game 2 of the World Series turned into a route as the Washington Nationals smacked the hometown Astros last night. Now its off to DC for Games 3, 4 and 5. Time to see the Astros get back off the canvas.
Yesterday, I began a two-part series based upon a recent Harvard Business Review (HBR) article by Thomas W. Malnight, Ivy Buche and Charles Dhanaraj, entitled “Put Purpose at the Core of Your Business”. In it the authors posit that building purpose into their business strategies did more than simply creating shared value, improving employee morale and commitment, giving back to the community or helping to improve environment. The authors found that the high-growth companies in their study had moved purpose from the periphery of their strategy to its core – where, with committed leadership and financial investment, they had used it to generate sustained profitable growth, stay relevant in a rapidly changing world, and deepen ties with their stakeholders. Yesterday, I considered the two critical roles that purpose can play in helping you to transform your business. Today, I want to look at developing and then implementing purpose and some of the benefits of driving purpose into the heart of your organization.
Not surprisingly, the authors believe that it all starts from the top of the organization. But more than simply the commitment of senior leadership to moving purpose to the core of their business, they theorize, “Leaders need to think hard about how to make purpose central to their strategy. The two best tactics for doing that are to transform the leadership agenda and to disseminate purpose throughout the organization.”
Once again pointing to the example of Mars Petcare, the authors found that the company Chief Executive Officer (CEO) changed both “composition and focus of the leadership team.” He wanted his team to go beyond simply “the performance of individual businesses; it would include generating “multiplier effects” among the businesses (such as between pet food and pet health) and increasing their contributions to creating a better world for pets.” This insight was not only critical but insight. Think about the multiplier effect of social media and it amplifies any message: good or bad.
This purpose approach was also used for one of the core constituencies of the Business Roundtable’s Statement on the Purpose of a Corporation: meeting stakeholder needs. To do so, the company began two new programs to support innovation in pet care: Leap Venture Studio, a business accelerator formed in partnership with Michelson Found Animals and R/GA; and Companion Fund, a $100 million venture-capital fund in partnership with Digitalis Ventures. In announcing these initiatives, the company declared that its ambition was “to become a partner of choice for everyone willing to change the rules of the game in pet care.”
A second example came from Finnish company Neste Oyj, which had government ownership. There was a great internal debate as to whether the company should even move into renewables, but it made the decision to do so. 10% of the workforce left the company in the first year of the refocus to purpose. Equally important to the shift was the question of how the company could “change its organizational mindset from volume to value selling—which entailed convincing customers that its clean fuels would be better for them in the long run? That shift meant going beyond wholesalers to work directly with the distributors and even the distributors’ customers.” Senior management understood it would take more than simply buy-in from the workforce but real collaboration across business units and corporate disciplines; which had tended to be siloed. In the process to win a tender, it was “no longer the sole responsibility of the sales department. The expertise of the whole organization—product knowledge, marketing, finance, taxation—would be required to understand the specific needs of customers like airlines and bus fleets. So Neste engineered a major reorganization and created a matrix structure, in the process rotating about 25% of senior managers and about 50% of upper professionals into new positions.”
It also meant that both “targets and incentive plans became cross-functional, designed to build capabilities both within and across businesses.” Note how this also helps both compliance and overall corporate culture. The financial incentives for individuals to engage in bribery and corruption are lessened. The cross-siloes approach also provides an inherent segregation which mitigates the opportunity prong of the fraud triangle.
Finally, with such increased collaboration, you have not simply increased engagement but a workforce invested with the corporate purpose. The authors concluded this section by articulating that purpose helped everybody in the company understand why, the business environment’s increasing emphasis on sustainability; what, value-creation programs offering renewable solutions to customers, which in turn generated higher return on investment (ROI) for the company and, finally, how, that is the “changing from a sales organization to a key-account management model with dedicated people responsible for strategic customers.”
The authors also identified three tangible benefits on the soft side of management; what they termed “the people-related aspects of running a business”. The first was to unify the organization as purpose helps employees understand the whys and get on board with the new direction. The second was to motivate the various stakeholders. Once again from the Purpose of a Corporation there are five key stakeholders and trust is a key element for all groups. When employees, “customers, suppliers, and other stakeholders see that a company has a strong higher purpose, they are more likely to trust it and more motivated to interact with it.” Further, purpose broadens impact. As “strategy involves exploring some fundamental questions for any business. “Purpose creates a basis for answering those questions and defining how each unit will contribute to the organization and to society as a whole. This focus on collective objectives, in turn, opens up many more opportunities to improve growth and profitability today and in the future.”
Building and transforming through purpose can help lay the groundwork for moving toward not only a more ethical culture but an environment where trust permeates the organization. Compliance can step to not only build on this more holistic approach but also use the tactical steps of controls, policies and procedures to make business processes run more effective so at the end of the day a company is more profitable.
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