Creating a strong sense of Purpose provides a major competitive advantage for an organisation. This is about why Purpose is so important for engagement with employees and other stakeholders, and it illustrates the growing evidence base supporting this argument.

What is organizational purpose?

Strategy is concerned with what an organisation wants to achieve, Purpose is longer-lasting and is about why the organisation exists in the first place and what matters in its work. Purpose defines why a business exists, informs investment decisions, aids prioritization and provides meaning for what an organization does for its employees, customers and other stakeholders.

Why is it important?

“He who has a why to live for can bear almost any how.”

Friedrich Nietzsche

People recognise how important a sense of Purpose is in their everyday lives. It quite literally helps people get out of bed in the morning, maintain focus on a goal and carries us through setbacks and tough times.

Purpose is important for organisations. Increasingly people look for deeper meaning as to why they should work for their employer, and customers and shareholders are increasingly concerned to engage with companies and brands that appeal beyond a transactional reward.

The pace of change and disruption is increasing, and the expectations of stakeholders and customers are become more demanding. Employees need to be aligned and engaged in a way that educates and motivates them so that they can take the initiative to respond as needed without waiting for directions.

Purpose has been likened to a North Star, providing a guiding light through troubled times when other factors threaten to divert direction. It gives an organisaation resilience to stay focused on its goals despite challenges raised by competitors, crises and other disturbances. Purpose helps provide context and rationale when numerous change programmes ask people to change ways of working and disrupt teams.

The evidence

Below are a list of and links to resources that highlight the importance of Purpose grouped under different headings.

Becoming more competitive:

  • “Built to Last: Successful Habits of Visionary Companies” (1994) by Collins and Porras had a profound impact. The authors, contrasting the performance of “great” performing companies against industry rivals, empathized the importance of core purpose and core values alongside audacious goals and vivid descriptions of the future as the hallmark of great companies.
  • The value of a strong brand, underpinned by a brand essence akin to a clear core purpose, has become accepted and measurable – half of Collins and Porras’ original list are in Interbrand’s 2015 most valuable brands (alongside what were yet to exist or nascent companies such as Google, Apple, Microsoft, Intel, Cisco and Facebook).
  • In recent years the importance of Purpose as a force for alignment and engagement was acknowledged by the Engaging for Success (MacLeod) Report, commissioned by the Secretary of State for Business in 2008. The report identified a number of positive business benefits flowing from employee engagement, and critically that improvements in engagement led to improvements in business performance. The first core enabler identified by the MacLeod Report is the existence of a strong strategic narrative:

LEADERSHIP provides a strong strategic narrative, which has widespread ownership and commitment from managers and employees at all levels. The narrative is a clearly expressed story about what the purpose of an organisation is, why it has the broad vision it has, and how an individual contributes to that purpose.

Engaging for Success; the MacLeod Report to Government 2009

Inspiring people to action:

  • Simon Sinek’s “How great leaders inspire action” (filmed in September 2009) remains amongst the top viewed Ted Talks (over 28m in 2016). His subsequent book “Start with Why” outlines the argument that purpose driven leaders and companies inspire others to action.
  • In a similar vein Dan Pink’s 2011 thesis outlined in “Drive: the surprising truth about what motivates people” identifies autonomy, mastery and purpose as keys to motivation. His Ted Talk also features in the top 20 all time playlist (15m views in 2016) and this link to his Royal Society of Arts summary provides an engaging visual illustration of his main ideas

Attracting and retaining talent:

  • Gallup, one of the organisations at the forefront of employee engagement measurement over the last 20 years, analysed the views of Milennials (20 – 36 year olds; born 1980 – 1996). Exploring what people want from work, Gallup identified six major shifts foremost of which is away from a focus on reward towards a focus on Purpose:

“Milennials don’t just work for a paycheck – they want a purpose. For milennials work must have meaning. They want to work for organizations with mission and purpose.”

Gallup, How Millenials Want to Work and Live, 2016

  • The Energy Project showed that organisations with a clear sense of Purpose are three times more likely to stay with their organisations in their 2013 Quality of Life at Work report

Engaging people to deliver results:

  • Building on the “Engaging for Success” report, Tanith Dodge the HR Director at Marks and Spencer plc. oversaw the “Nailing the Evidence” paper (2012). Drawing on academic research, consultant surveys and case studies her team established positive correlations between effective engagement and: growth and profitability; customer service; productivity; wellbeing and health and safety; employee retention; and lower turnover and absence.

Finally for a document that provides a comprehensive overview of why Purpose comes before profit, see the Big Innovation Centre’s May 2016 interim report on The Purposeful Company.

“Purpose is key to corporate and economic success. Great companies are enabled by the pursuit of clearly defined visionary corporate purposes, which set out how the company will better peoples’ lives.”

In summary:

  • A clear Purpose helps align and focus effort and provide meaning for what the business does
  • Purpose goes beyond profit and focuses on what an organisation does to better the lives of its customers and stakeholders
  • Companies with clear and well-communicated Purposes have shown significant long-term performance
  • One reason is that Purpose is a key driver of employee engagement which correlates with a range of performance benefits
  • For younger people, Purpose appears to be more important than ever, suggesting that for the long-term success of the business attracting and retaining talent will increasingly rely on the clarity and visibility of Vodafone’s Purpose
  • Establishing shared purpose remains a key challenge for leadership and management, and a potential differentiator for successful businesses.

Mike Pounsford