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Research insights: The pivotal role of Purpose

Increasingly there is research that substantiates the claimed value of Purpose; importantly, this research also shows when Purpose will most likely deliver real and lasting benefit.

Of especial significance is research on Corporate Purpose and Financial Performance, based on more than 450,000 survey responses of worker perceptions about their employers, from a sample of 429 U.S. companies. This dataset has enabled measurement across a diverse set of companies with respect to actual employee beliefs about their employer (rather than claims made by the organizations’ leaders), according to a wide variety of organizational workplace variables, including one of purpose. The survey also allowed comparison of these beliefs at various job levels, to investigate how they differ by job levels and how those differences relate to performance.

Tellingly, overall it was found that the survey’s measures of purpose were not correlated with firm financial performance in either direction. However, disaggregated analysis enabled investigation of how purpose interacted with other attributes in the data. This analysis enabled identification of two types of companies with purpose, which were termed “high purpose-camaraderie” and “high Purpose-Clarity” organizations. This level of analysis found that only the high Purpose-Clarity organizations exhibited superior accounting and stock market performance.

High purpose-camaraderie organizations included companies that score high on purpose and on dimensions of workplace camaraderie (for example, “This is a fun place to work”; “We are all in this together”; “There is a family or team feeling here”). High Purpose-Clarity organizations that score high on purpose but also on dimensions of management clarity (e.g. “Management makes its expectations clear”; “Management has a clear view of where the organization is going and how to get there”).

This research also found that middle managers and professional workers seem to be the key players in driving this relationship, not hourly workers and not top executives. This highlights the absolute importance of fostering an effective middle manager layer within firms, who have bought into the Purpose and can make daily decisions that guide the firm in the right direction.

The explanation for this is evident in the researchers’ finding that people have a large degree of cynicism toward business leaders who speak about purpose. Senior management may have a sense of purpose that they try to cultivate in others, but it seems employees are generally not buying what they are selling. This brings us back to the need to approach Purpose in the right way, a conclusion that is underlined by another piece of research, The Business Case for Purpose.

This global survey of 474 executives found that, while most executives believe purpose matters, only a minority said their company currently runs in a purpose-driven way. Of significance is the figure below, extracted from the report, which provides an insightful summary into the perceived importance for an organization’s purpose to be integrated into a variety of functions and activities. This shows that respondents tended to prioritize integration of purpose into high level functions such as strategy development and forming and communicating culture and values.

While Purpose must be integrated at the higher levels, the evidence suggests that it will only be taken seriously through the organization and will only become a lever for sustainably improved performance if effort is taken to work it into the core of the business model (in areas such as leadership development and performance metrics and incentives). This piece of research found some awareness of this need, but clearly this requires more attention if purpose is to deliver full benefit. Research such as this indicates that the hype around Purpose has helped raise vital awareness, but there remains a gap in understanding how to deploy this tool to full benefit. It seems that it has not yet been fully integrated into the management ethos, this fueling the understandable cynicism that this is little more than leadership buzz. Changing Organizations for Good provides the method to help organizations become truly purpose driven.