In part 4 in our Mindsets of Workplace Transformation series, we examine how purpose-driven leadership and profit-driven leadership don’t have to be at odds.
In previous installments, I’ve covered three key mindset shifts leaders must make to transform their workplace from struggling to thriving: the shift from seeking status to being of service, the shift from maintaining control to fostering creativity, and the shift from focusing on survival to envisioning what it takes to thrive. The fourth mindset of workplace transformation is at the heart of the purpose-driven leadership and purpose-driven business revolution: focusing on purpose before profit.
Leaders and employees alike desire purpose in their work, but have trouble sustaining the shift in focus from profit to purpose. Why? Because in both business and in life, Western culture emphasizes money as the ultimate foundation for the good life. “Lifestyles of the rich and famous” television programs, the plethora of get rich quick schemes and the mounting crisis of credit card debt all point back to the central belief that you can, in fact, buy happiness. While growing in popularity, the stories of the wealthy celebrities who use their money to support charities or do other good work still get far less attention than the stories of their latest trip to the cosmetic surgeon or their $50,000 handbag.
In business too, leaders have traditionally been hard-wired to focus on finances as the ultimate driver of business health. According to a December 2016 article in The Atlantic, “The average holding time for stocks has fallen from eight years in 1960 to eight months in 2016. Almost 80 percent of chief financial officers at America’s largest public companies say they would sacrifice a firm’s economic value to meet the quarter’s earnings expectations. And companies are spending more and more on purchasing their own shares to drive stock prices up, rather than investing in equipment or employees.” With this thinking so prevalent, it is easy for leaders to see profit and purpose as conflicting goals.
Thankfully this is changing. There is now an abundant and ever-growing body of research to support what enlightened leaders who are driving this movement already know — that purpose is essential for the long-term profitability and sustainability of any business.
Here are a few of my favorites:
Purpose attracts and engages employees:
The workplace is in the midst of an immense generational shift as more and more millennials find themselves in leadership positions. Millennials have a different relationship to purpose than previous generations, with over 70% saying they value purpose at work. Though not all millennials are of work-age yet, in a few years they will be the most represented generation in the workforce.
Conveying a sense of purpose can definitely attract better talent. However, attracting new talent is just the first step. Even more important is the fact that a focus on purpose quadruples the likelihood of employees being engaged at work. This has a huge impact on the bottom line. Companies with high satisfaction and engagement among their employees average 12% higher profitability.
Purpose attracts and retains high-paying customers:
Having a higher purpose (and communicating it in your marketing) can make or break a company. Price and quality being equal, 92% of customers choose a product that appeals to a higher purpose. Even more relevant to business, there has been a 10% increase (from 45% to 55%) in the number of customers willing to pay more for a product that markets itself with a higher purpose. With 9 in 10 consumers willing to pick a product based on higher purpose, and over half willing to pay more for products with purpose, conveying a genuine purpose seems like an obvious business choice.
But be careful. As more and more businesses become aware of the payoff of purpose-driven marketing, consumers are becoming increasingly cautious of purpose-washing – the attempt of businesses to reverse engineer some sort of purpose for their business to support their latest marketing campaign. Leaders, if your true motive for touting noble purpose is simply to increase profits, this underlying intent is likely to triumph and you’ll find yourself in some serious trouble. Consider how Volkswagen looked in 2015 when the EPA discovered that the company had installed software in their vehicles designed to cheat emissions tests. This discovery cast doubt on the company’s much-marketed claims of a purposeful company that cared about the environment.
Purpose can mean the difference between life and death
A 2015 study by cardiologist Dr. Randy Cohan at Mt. Sinai Hospital, which reviews 10 studies involving more than 137,000 people with an average follow up of 8.5 years, indicates that those possessing a strong sense of purpose had a 23 percent reduced risk of death from any cause. Studies published in the Journal of Clinical Psychology as early as 1980 show that a sense of purpose fights depression, and a 2014 study by Patrick Boyle, PhD even found that it decreases the onset of Alzheimer’s Disease by a whopping 240%.
The importance of purpose to wellbeing is very familiar in Japanese culture, where the concept of ikigai, (life + value), is considered a crucial part of a life well lived. Dan Buettner’s book, Blue Zones: Lessons for living longer from the people who’ve lived the longest. identifies purpose as a key element supporting the longevity and overall well-being of people in Japan and other areas of the world where people seem to live longer and stay healthier as they age. (For a more personal exploration of ikigai, check out the chapter on finding your own ikigai in my latest book, Wabi-Sabi Wisdom).
Finally, the Gallup-Sharecare Well-being Index, a unique partnership that surveys over 1000 adults each day to collect information on individual and collective health and wellbeing, has also identified career wellbeing as a key driver of overall wellbeing. Most people don’t really need research to know that this makes sense. If you love what you do every day at work, it’s more likely to be a source of energy and positivity that enhances your health. At the very least, career wellbeing means your work doesn’t create the stress that destroys your life. Common sense also dictates that employees who are healthy are in a better position to contribute to both the purpose and the profits of their organization.
But, you might still be asking, are purposeful organizations really more profitable?
Purpose increases profits, period:
Research is increasingly showing that purposeful companies are indeed more profitable. A key 2013 Deloitte study of 1,310 US adults found that organizations with a “culture of purpose” outperform those that focus on pure profit. These gains were across the board: 90% of people who worked in organizations with a strong sense of purpose also reported strong financial performance, employee engagement and customer satisfaction. By contrast, 65% of those in organizations without a sense of purpose reported low financial performance.
As you can see, it is becoming more and more difficult to deny that investing in cultivating a culture of purpose makes good business sense. But despite the fact that many high-level leaders are aware of the research, most fall far short in their ability to apply it. The Deloitte study reveals that while 64% of executives think the company has a strong purpose, only 54% of employees think the same thing. Further, 80% of Global CEOs admit to not knowing their purpose (Harvard Business Review, 2014), despite identifying it as a top priority for themselves (IBM, 2012).
So how does a leader start to close the gap?
Know that fear blocks purpose.
The money mindset for decision-making is driven by fear, security, and scarcity. It is motivated by an urge to play it safe and avoid mistakes. But who’s changed the world — or struck it rich — by playing it safe? Purpose-driven leaders know that letting fear drive their decisions blocks their ability to stay true to their personal and business purpose. In fact, they see certain types of fear as a sign that they are on-purpose and challenging themselves to do things that really matter in the world and their company.
If most of your decisions prioritize making money, controlling costs and sticking to budgets, you’re falling prey to this fear-driven mindset. If your first question is always, “Can we afford it?” you’re limiting both you and your business. How? Traditional management wisdom says that focusing on budgets and the bottom line is good business practice, but good management is not always good leadership.
Great leaders keep their sights set on where they want to go and how they want to make a difference in the world. From that vantage point, they are able to face their fears and take strategic risks to do things they “can’t afford” in the short term because they know that, in the long term, they can’t afford not to make that investment. Whether they are investing in people, infrastructure, or ideas, purpose-driven leaders first focus on whether the idea is going to help them better fulfill their company’s purpose. And, just to be clear, they absolutely do consider if the idea will be profitable and how to work it into the budget of the business — they just don’t start there.
Ask the right questions.
To shift your thinking from short-term profit to long-term purpose, ask these questions before entertaining the question of financing, profit, or budgets:
- Will this help us to better fulfill the organization’s true purpose?
- Will investing resources in this initiative move us towards our vision more quickly, or otherwise add value/quality to the journey for the players involved?
- What is the anticipated real value (both financial and non-financial) of this investment for me, my team, the organization, our customers, and the world?
If an idea passes the purpose screen, purpose-driven leaders then shift into possibility-focused strategic questions like the following:
- How will we work this into our budget? (Note: They don’t ask “can we” or even “how can we”, but “how will we”. Purpose-driven leaders are committed to doing those things that further the organization’s purpose and don’t question “if” it is possible — they just get busy figuring out how to make it happen.)
- What other initiatives would this make redundant? What other projects could or would need to be de-prioritized? (Purpose-driven leaders are strategic and they understand that choices may need to be made to let go of things they are doing to better fulfill their purpose. This might involve dramatic shifts in their core business model or business processes that impact profits negatively in the short-term.)
- How can we do this faster? Better? Cheaper? Without having to compromise? (Purpose-driven leaders are pragmatic and strategic but they also understand something else that profit-driven leaders don’t: Time and money might be finite but creativity isn’t. They are skilled at asking innovation inducing questions that challenge people to think outside of their current limitations. Elon Musk and SpaceX are a great example. Through his single-minded focus on his core purpose of making life multi-panetary, he has led his team to do something even NASA couldn’t — the first reflight of an orbital class rocket. )
Create systems for a purpose-driven culture.
Purpose-driven leaders know that building a strong, purpose-driven culture is essential for empowering all employees to deliver consistently on the purpose. This kind of culture doesn’t happen or survive without systems.
Leaders who are focused on the bottom line know that systems increase efficiency, improve results, reduce costs and ultimately increase profits. But leaders who are focused on the bottom line often neglect to view the systems they design through the lens of purpose and the kind of culture they want to create.
Here is a simple example. Many companies try to motivate their sales people by running contests where the person who gets the highest sales or reaches some other goal gets a prize. While this might be effective in increasing sales, it is not the kind of system that would reinforce teamwork. If teamwork is a key element of your desired culture and a requirement of your business being able to fulfill its purpose, then this system for motivating performance in your sales team is going to be counter productive.
Creating systems for a purpose-driven culture obviously starts with clearly defining your organization’s purpose, but it shouldn’t end there. Understanding other key elements of the culture that will enable the fulfillment of your purpose is also essential. This includes clearly defining your values, the core strengths and differentiators of your company and a clear and compelling vision. Profit-driven leaders have read the books that tell them they need to define these things as well, but they tend to stop there. Building a purpose-driven culture requires taking it many steps further.
Here are a few ideas to do so:
- Outline clear milestones along the path to fulfilling your purpose and communicate these with employees. Use technology to create dashboards to monitor progress and celebrate achievements along the way. Your purpose is something that is so big it will never be fully achieved, so it is important to identify tangible markers of progress along the way or people can suffer from the burnout that occurs when there is always so much more to be done.
- Create an onboarding plan that explains how each new employee’s role contributes to achieving the business’s purpose.
- Incorporate values and purpose alignment as part of your performance development and review process.
- Provide employees with training and coaching to help them connect with their own individual purpose and values and identify how it links to the company’s purpose.
Finally, it is important to understand that for all the above benefits of a building a purpose-driven business and culture to kick in, your commitment to purpose must be authentic. In other words, if the only reason you are working to build a purpose-driven business is to make more profits, your decisions will ultimately reflect your true bottom line.
This doesn’t mean that if your business wasn’t founded on a clear higher purpose you shouldn’t look to find one. It’s okay to reverse engineer your business purpose to a certain extent, but be clear on the difference between doing this work as a branding exercise and doing it as an exercise in business transformation. It is deep work, that requires a good long look in the mirror at what you really want to stand for in the world, and how you might not be measuring up. You can’t just declare your purpose in the world with pretty words and pictures, you need to be prepared to transform yourself and your business to really live it. Ultimately to truly be a purpose-driven leader, you need to be prepared to sacrifice profits in favour of your purpose. Fortunately, If you commit to shifting your priorities consistently over time, any short-term sacrifice of profits is bound to turn in your favour.
