What do 181 CEO’s Agree On?

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Purpose Matters

181 CEO’s signed a letter from the Business Roundtable last week, stating that purpose matters and shareholders are not the only stakeholders who should receive value from the endeavors of business.

They specifically note that there are 5 stakeholders they are accountable to – shareholders, employees, customers, communities and suppliers. Interestingly, as a young consultant, my firm used this framework for strategic planning with our clients back in the late 1980’s. By taking this more holistic view of who should benefit from the corporation, the purpose of the organization became more meaningful to everyone the organization touched.

We’ve spoken about purpose for years. It’s what gets people up in the morning. It’s what makes people put in the extra effort when it’s needed. It’s what makes us feel a part of something bigger.

Empirical research now supports the fact that purpose and profit go together. Research by Gloria Gartenburg and George Serafeim found that companies with high levels of purpose outperform the market by 5-7%. This finding, according to Gartenburg and Serafeim is on par with companies that have best-in-class governance and innovative capabilities.

According to Gartenburg and Serafeim just having a purpose is not enough. Success comes when:

  • Senior leadership has embedded that sense of purpose through the organization, especially at the middle manager level
  • There is strategic clarity throughout the organization about how to achieve that purpose

Purpose as a Core Tenet of Successful Change: These findings made me think about one of the critical elements of change I’ve been writing about for years, including recently in HBR Online and elsewhere. Clear, compelling purpose provides clear direction and ensures that everyone understands the “why “ of the change (i.e., the purpose), not just the what.

Today, organizations have to be able to change quickly. A natural outgrowth of rapid change is uncertainty and, at times, frustration that what we’re doing today flies in the face of what we did yesterday. However, if your organization has a clear sense of purpose and change is continually tied back to that purpose, uncertainty can be managed, and frustration minimized.

And when that purpose is not just aligned to shareholders but to the multiple stakeholders, the change will be meaningful in new ways. It will not just be a singular group who benefits. Rather it will have more meaning for the entire ecosystem of the organization.

Those organizations who establish a meaningful purpose and embed it in the culture of their leadership and their organization stand the best chance of thriving amid the chaos of constant change and upheaval in the world.