Purpose not profit – that’s how to navigate today’s turbulent economy
Two-thirds of leaders are profoundly rethinking their organisation’s purpose as a result of disruption, with 52% of these moving to a wider concept of purpose as a way of giving them agility to innovate in times of turbulence.
A survey of 1,470 global leaders representing companies across various industries in developed and emerging markets around the world including 500 businesses with annual revenues of US$2.5bn or more finds that a more intense focus on purpose can increase a company’s strength, resilience and competence in the areas needed most in a disrupted world.
For many organisations purpose is about serving a single stakeholder group, such as shareholders, employees or customers. When asked to characterise their organisation’s purpose, 33% of those surveyed cite bringing value to customers, 15% of global organisations say boosting their share price and 11% say creating value for employees, all focusing on a single stakeholder group.
While 97% of companies with a well-integrated purpose say they see a good or great deal of incremental value, only 56% of those with a somewhat well-integrated purpose achieve the same level of value
However, 40% of respondents to the survey by global consultancy EY defined purpose as something greater: a human-centered, socially-engaged conception of purpose that seeks to create value for a broad set of stakeholders and inspire a call to action.
Executives from life sciences and government and publicly owned industries most frequently claim a purpose that seeks to create value for multiple stakeholders, while health companies most frequently cite an aspirational reason for being. By contrast, the industry with the lowest embrace of purpose is oil and gas.
However, only 9% of companies say their purpose is fully embedded in their business activities. Yet those who have embedded purpose most deeply report the highest incremental value creation from that integration. While 97% of companies with a well-integrated purpose say they see a good or great deal of incremental value, only 56% of those with a somewhat well-integrated purpose achieve the same level of value.
Companies that have deeply embedded an aspirational and human-centric definition of purpose cite specific ways in which embedding their purpose across activities creates value. Fifty-two percent say that it helps build customer loyalty; 51% report that it preserves brand value and reputation; 42% cite that it helps them attract and retain staff and 40% attribute the ability to develop new and innovative products to the presence of purpose within their business.
In order to help businesses understand the pathway to turning the purpose rhetoric into reality, the EY report How can purpose reveal a path through disruption? Mapping the journey from rhetoric to reality identifies four steps that can help every organisation reach their purpose goals:
- Clearly articulate a purpose that responds to the needs of stakeholders and is grounded in what an organisation does
- Embed purpose into strategy and operations, and align decision-making with that purpose
- Constantly evaluate where you are in your journey and what needs to change
- Accelerate the journey by placing purpose at the centre of your culture and ensuring it is owned by their people