“Purpose has come a long way in the last five years.”
When Hubert Joly, former CEO of Best Buy and Harvard Business School Professor, reflects on the evolution of purpose over the last five years, he identifies one moment as a catalyst that helped legitimize putting purpose on the CEO agenda.
In 2018, Larry Fink, the CEO of Blackrock, wrote in his letter to CEOs that he would not be investing in businesses that didn't have a purpose.
He was thereby encouraging CEOs to drive their business’ financial performance in the context of purpose and longer-term strategy, something that Joly is thankful for.
“Purpose went from not being talked about to being pervasive,” he says.
The latest findings in our CEO Purpose Report confirm this, with 76% of CEOs surveyed agreeing that the importance of purpose has increased over the last five years.
“In the workshops we run for new CEOs at Harvard Business School, we ask these CEOs two questions. The first is, on a scale of one to 10, how important is having a strong purpose to drive your company forward? The average answer is about 8.5; having a purpose is very important.
The second question is, how effectively is it permeating through the organization? The answer for this is five. This shows that there is a big gap.”
This is a consistent theme that we have seen over the last five years of doing the CEO Purpose Report: CEOs are struggling to operationalize purpose. This year, although 89% of CEOs surveyed say they have a purpose statement, they told us their number one challenge is making it relevant and actionable.
For Joly, implementing purpose comes down to the architecture and activation of three elements: purpose, strategy, and culture in an aligned fashion.
“You want purpose to be the keystone of your business strategy. Purpose is the North Star and it's the filter for strategic decision making. Businesses should look at their portfolio of activities and ask themselves, considering that purpose, what should we stop doing, continue doing, start doing, and what should we evolve.”
We’re seeing more and more leaders use purpose to inform business strategy. In fact, 63% of CEOs told us they’re using their purpose to help guide strategic decision making.
To illustrate this, Joly shares this: “Companies can ask four simple questions when considering a decision: (1) Does it fit with our purpose? (2) Is it good for the customers? (3) Can we deliver? (4) Can we make money?”
Also, in a multi-stakeholder world, businesses should take the time to define what their purpose means for all groups of stakeholders, including employees, customers, vendors, community, the planet, and, of course, shareholders.
In parallel to purpose guiding strategy and decision-making, businesses should be using it to articulate their culture, says Joly.
“For example, Microsoft’s purpose is to enable every individual and organization on the planet to accomplish more. Their culture is guided by this purpose and defined around the two ideas: a growth mindset and empathy, two key elements to help them address the unmet, unarticulated customer needs. Microsoft built their entire culture around these concepts; that’s how they unleash their purpose.”
CEOs have told us that this year, employees are the number one stakeholder showing that there is a growing acknowledgement that if employees are united with a shared sense of purpose, there is a higher sense of commitment and work satisfaction, leading to improved business performance.
“The most intriguing challenge is then how do you enable employees to write themselves into the story.”
Joly explains that while top-down communication of a business purpose is important, leaders of all levels should make sure they understand what drives individuals on their teams and how it can connect with the work and the purpose of the company.
“It's leadership from the inside out, which is very powerful.”
We’re certainly seeing a tipping point where businesses are realizing old business models are no longer working.
“Many leaders have historically focused on the ‘what’, and not enough on the ‘how’. Making purpose come to life requires a strong focus on the 'how' – for example, the transformation of the culture."
For Joly, embedding purpose throughout the organization comes down to a mindset shift, with CEOs and leaders needing to act as 'gardeners' focused on creating an environment that can unleash human magic, rather than the traditional role of telling others what to do.
With our world facing a multitude of challenges – climate change, geopolitical tensions, and growing inequality, to name a few – another reason purpose is more critical than ever is that people are increasingly turning to businesses to make a positive difference in the world. And Joly can’t wait to see how they respond.
“Business leaders have the opportunity to create a future that does not exist yet to help tackle some of the greatest challenges in the world. It's a tall order, it's challenging, but it's also incredibly motivating.”
Read the Brandpie CEO Purpose Report to see how CEOs are using purpose to navigate changing complexity.
Brandpie CEO Purpose Report 2023
Find out what CEOs think about the evolving role and importance of purpose.
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