Now More Important Than Ever:
The Purpose-Driven Organization
Literature Review Summary

Thank you to Cornerstone OnDemand for sponsoring this research!

Introduction

We’ve been living in a COVID-19 world for several weeks now, and many people are feeling the effects. Companies cut over 700,000 jobs in March and the total of unemployed workers now exceeds 16 million.1,2 Suppliers are scaling back on production,3 and the consumer confidence index declined in March to 120.0 compared to 132.6 in February.4 In many ways, there is a sense that we just need to survive this time before we can get “back to normal.”

But in so many other ways, this crisis is providing an opportunity for individuals and organizations to contribute more to others than they ever have before. Many leaders right now assume that companies have an obligation to their workers and communities – even to humankind – to figure out what they can uniquely contribute to help others get through this crisis. And what’s more – to get it to them for free or at cost. (Click here for an epic list of companies contributing to humankind).

This crisis has brought purpose-driven organizations – where the organization has a responsibility to deliver value to its stakeholders, not just shareholders – into the spotlight.

Given this dynamic, it is even more important to understand how organizations inspire people and make purpose-driven decisions. Our hope is that we can capitalize on this unique moment to better understand how leaders and HR professionals can leverage purpose to navigate the current crisis and continue to add value well beyond it.

To that end, we have begun a study on this topic where we are asking:

What is the role of purpose-driven organizations today, and how can they help stakeholders navigate and survive this new reality?

It’s important to start by understanding what others have said – and there’s a lot of that! To better understand purpose in organizations, we looked at more than 50 published scholarly articles, periodicals, research reports, and blogs from the past five years. Given the current COVID-19 pandemic, we also extensively scoured what has been written in the last month to identify trends or shifts in purpose-driven organizations.

Five themes emerged from our review. In this article, we summarize the most interesting insights we learned:

  1. Good purpose statements inspire action
  2. Relationships anchored in purpose can increase resilience
  3. Purpose enriches the employee experience
  4. Leaders face barriers to purpose-driven decisions
  5. Purpose-driven metrics are a big problem

Good purpose statements inspire action

Many organizations spend a significant amount of time, effort, and even money developing a purpose statement. Some even outsource it to PR or advertising firms to come up with a catchy slogan. But our review found a different story for organizations that are able to develop a good purpose statement and activate it throughout the organization.

Good purpose statements are clearly defined and distinct from other different, though related, terms like mission, vision, values, and principles:5,6

  • Vision. Defines what the organization aspires to become in the future.
  • Mission. Establishes the organization’s specific business: what it is and what it isn’t.
  • Values. Defines what the organization prioritizes and values most.
  • Principles. Outlines a set of behavioral guidelines or rules.

Purpose, on the other hand, has its unique flavor:7

Purpose: Expresses the organization’s impact on multiple stakeholders (employees, customers, shareholders, suppliers, communities) and connects to people’s intrinsic motivation. At times, it’s even called an organization’s philosophical beat because it serves to inspire employees.

Good purpose statements motivate people to take action through a shared sense of direction. It is shared because there is a collective sense among colleagues of working toward an unquestionable common goal.8

Relationships anchored in purpose can increase resilience

For purpose-driven leaders, challenging situations represent an opportunity for the organization to live up to its purpose of serving a greater cause. This couldn’t be more true in today’s coronavirus situation. Many organizations are shifting priorities to address market needs, such as distilleries and perfume makers that are now manufacturing hand sanitizers9 or automakers now producing ventilators.10 These actions can go a long way. Research shows that 88% of people feel it’s particularly crucial that organizations not only have a clear purpose statement, but that they also demonstrate behaviors that are congruent with it.11

In our readings, we found that the benefits of purpose go both ways because people are more willing to help and defend a purpose-driven organization, if necessary. In a recent U.S. study, for example12

  • 73% of people said they would be more likely to defend a purpose-driven company if someone spoke badly of it.
  • 67% of people said they would be more forgiving of companies that lead with purpose compare to those that do not.

In companies that had an average annual growth rate of 30% or more in the previous five years, purpose enabled them to overcome the challenges of slowing growth and declining profitability.13 In general, purpose isn’t only beneficial to stakeholders, but it is also favorable to purpose-driven organizations. It allows them to build trust and loyalty both internally and externally, which in the end, can make them more resilient to challenging situations.

Purpose enriches the employee experience

During the current COVID-19 pandemic, it may be easy for employee experience – employees’ collective perceptions of their ongoing interactions with the organization14 – to take a back seat as organizations grapple with business disruptions. But while it may be tempting to neglect employee experience, truly purpose-driven organizations tend to be better equipped to protect it.

For example, in purpose-driven organizations, HR plays a crucial role in helping people understand their purpose, how it connects to the organization’s purpose, and how their daily work contributes to it. This extra attention and effort in helping individuals connect their individual work to the organization’s purpose, especially during a crisis, go a long way in enhancing people’s connection to their work and the organization. Employees who perceive their work as meaningful and purposeful are three times more likely to stay with their organization.15

Organizational culture is a particularly important element in purpose-driven organizations. For example, we noticed a parallel between our study on employee experience and the purpose-driven organizations in our readings. Organizations with a positive employee experience display five behaviors that are woven into their cultural fabric (see Figure 1).16

Figure 1: Five Essential Behaviors in Supportive Cultures | Source: RedThread Research, 2019.

Similarly, purpose-driven organizations, and especially leaders, tend to demonstrate behaviors that support a positive employee experience:

  • Collaboration. In purpose-driven cultures, shared purpose – a collective sense of working with colleagues toward a common goal – is the most important source of meaning for employees.
  • And meaning matters because employees who rate their work as very meaningful report 14% more job satisfaction than average employees, and 51% more satisfaction than employees with the least meaningful jobs.17
  • The power of shared purpose is more important now than ever. Consider healthcare workers on the frontlines who continue to put themselves at risk to treat infected patients driven by their shared purpose of saving lives.
  • Examples of HR activities that foster collaboration and shared purpose:
  • Career pathing to help existing employees discover their individual purpose and align it to career paths, projects, and new experiences that fuel their sense of meaning and purpose.
  • Learning and development opportunities – training, mentoring, coaching, education, resources – to help employees build skills that further their sense of meaning along with the organization’s purpose.
  • Alignment. Purpose-driven leaders use storytelling to help employees personally identify with the impact of their daily work on the organization’s stakeholders,18 which creates alignment and a stronger sense of shared purpose.
  • Example of HR practices that create alignment:
  • Recruitment (hiring for purpose) by having a compelling employer brand that attracts the right individual to apply for jobs at the organization.
  • Transparency. Purpose-driven organizations have leaders who translate (reduce the complexity of purpose) and truthfully communicate the social impact of every decision.19
  • Consider for example, Patagonia’s decision to close all stores amid the COVID-19 outbreak to protect both employees and customers, and their commitment to continuing to pay employees throughout their closure.
  • Example of HR practices that cultivate transparency:
  • Communication to clearly and constantly convey purpose-driven beliefs, values, assumptions, behaviors, and decisions.
  • Psychological Safety. Purpose-driven leaders dedicate time to talk personally with employees and intentionally integrate rituals or events that manifest their shared sense of purpose and enhance their mutual trust and psychological safety.
  • Crises like the current pandemic are testing many leaders’ ability to calm down fears and instill a sense of safety throughout the organization. The Coronavirus Generosity Challenge is an example of leaders who are finding ways to make a positive contribution internally and externally amid the current situation.
  • Example of HR practices that build greater psychological safety:
  • Manager support to learn to lead a remote team with empathy (e.g., encourage them to check-in more frequently with their direct reports via video conferencing or phone calls and have meaningful conversations).
  • Feedback-sharing. Purpose-driven organizations actively solicit employees’ ideas to activate their individual sense of meaning and their collective sense of purpose.20
  • Purpose-driven organizations tend to measure purpose through real-time feedback mechanisms (e.g., pulse surveys) that influence the employee experience.
  • Example of HR practices that support feedback-sharing:
  • Pulse surveys to collect real-time and frequent employee feedback, especially during these challenging times.

Leaders face barriers to purpose

Historically, many leaders have believed that a purpose-driven focus conflicts with a profit-driven approach. This may be of no surprise as most of the world has focused on only maximizing profit for shareholders . But even though purpose is often cast as the opposite of business profit, this isn’t necessarily the case.

Organizations can define their impact on stakeholders as a spectrum of possibilities based on what aligns with the firm’s objectives and values. This spectrum can range from deliberate social impact to maximizing both impact and profit objectives, and to meeting the traditional market expectations of pure business profit (see Figure 2).21

Figure 2: The Force for Good Spectrum | Source: INSEAD Responsibility – BLOG, 2020.

Beyond the purpose-vs-profit debate, leaders face other barriers that prevent them from adopting purpose-driven strategies:22,23

  • Market volatility tied to shareholder expectations, which hinders leaders’ ability to focus on long-term value creation.
  • C-level executives sometimes lack the ability to envision synergies between sustainable development goals and their business.
  • Organizational systems and infrastructure that are not aligned with long-term purpose and value.
  • Hiring people whose individual purpose does not align with the organization’s purpose.
  • The lack of development opportunities for leaders who do not behave in purpose-driven ways.
  • Employee performance targets and incentives that are not aligned with the organization’s purpose.

This is further worsened by limited purpose-driven targets or incentives tied to leaders’ scorecards; 68% of leaders see the need to make better progress in this area.24

Yet, it seems like the current COVID-19 pandemic is affording leaders a bit of flexibility to make more purpose-driven decisions than in years’ past. We’re seeing this play out in leaders’ responses to policies and practices that protect employees or in their rapid pooling of resources to address community needs for more ventilators or masks. We see 2020 as providing an opportunity to cement a purpose-driven approach as a strategic and imperative way of doing business.

Purpose-driven metrics are a big problem

Nowadays, purpose is touted as a cost-of-entry for any business. This has been partly driven by pressure from well-known investors,25 by increased scrutiny over the impact of organizations on stakeholders,26 and to a certain extent, by the promise of greater consumer trust and loyalty along with increased talent retention.27

This focus on purpose-driven organizations is bringing the need to measure impact to the forefront; which is easier said than done. In theory, purpose-driven organizations can substantiate their triple bottom line (TBL) impact on three areas: people, planet, and profit.28 There are numerous measurement approaches that follow TBL principles. Here are some of the common ones:

  • Environmental, Social, and Governance (ESG) criteria 29
  • Includes measures of environmental impact (e.g., green building, pollution prevention, energy efficiency), social metrics (e.g., human capital engagement, labor standards), and governance (e.g., business ethics).
  • Social Return on Investment (SROI)30
  • Tracks relevant social, environmental, and economic outcomes to forecast or evaluate impact. It calculates a ratio after assigning a monetary value to inputs and outcomes.
  • B Corporation Certification31
  • Assesses all aspects of a company (environmental and social impact, corporate governance, community involvement) based on accountability and transparency standards.
  • SAM Corporate Sustainability Assessment32
  • Serves a wide range of stakeholders and includes several indices:
  • The Dow Jones Sustainability Indices (DJSI)
  • S&P ESG Index
  • ISO 26000 Social Responsibility33
  • Provides guidelines to effectively assess and address social responsibilities to multiple stakeholders: customers, employees, environment, suppliers, and shareholders.

But in reality, organizations find it challenging to actually measure their TBL; only 35% of companies align their business practices to a multi-stakeholder model today.34 This is partly driven by unclear and unsystematic reporting mechanisms.

Entities such as The International Organization for Standardization (ISO) and The Global Reporting Initiative (GRI) aim to fill this gap by outlining specific reporting guidelines that facilitate organization- and industry-wide comparisons.35 Organizations can use the recommended guidelines to report their impact across clearly defined economic, environmental, and social categories.

Must-read articles

These articles caught our attention because they were interesting or insightful in helping us understand purpose-driven organizations.

“As the COVID-19 crisis disrupts organizations across the globe, HR leaders must respond quickly and comprehensively, considering both immediate and long-term talent consequences.”

This article summarizes findings from a recent HR survey on how organizations are addressing coronavirus challenges and needs.

Highlights:

  • States that 88% of organizations have encouraged or required employees to work from home.
  • Shows how organizations are responding to coronavirus-related absences.
  • Lists recommendations for HR leaders on managing remote talent.

“When faced with this unremitting uncertainty, how can a company maintain clarity on its societal purpose? What is the role and responsibility of your business in a time of chaos and crisis?”

This article suggests four levers to guide purpose-driven organizations during the current COVID-19 crisis.

Highlights:

  • Recommends that organizations leverage their core business assets to meet the current needs of stakeholders.
  • Emphasizes the importance of focusing on generosity and compassion (vs. profit) during this time of need by adding value to stakeholders, especially employees and local communities.
  • Advises leaders to keep a long-term view of their company’s role in navigating the pandemic and helping stakeholders return to normalcy once the current crisis passes.

“While we admit that considerable progress has been made in developing theory, models, and disclosure norms for ESG objectives, we believe that we are nowhere close to achieving ‘integrated reporting,’ as some people might claim.”

This article states that many organizations aren’t creating value for all stakeholders.

Highlights:

  • Suggests that real change will come once organizations transform their financial and non-financial measures.
  • Mentions that maximizing shareholder returns remains the main objective – while keeping ESG goals as a secondary objective – for many organizations.
  • Asserts that organizations aren’t close to developing an “integrated reporting” framework that includes both tangible and intangible capital resources.

“When customers, suppliers, and other stakeholders see that a company has a strong higher purpose, they are more likely to trust it and more motivated to interact with it.”

This article highlights results from a global study of companies that use purpose to generate sustainable growth, stay relevant, and deepen ties with stakeholders.

Highlights:

  • Describes a purpose-driven strategy to help companies overcome challenges.
  • Provides specific suggestions to help organizations define their purpose and implement it as a core business strategy.
  • Highlights the tangible and intangible benefits of purpose to organizations.

“Purpose is about empathy – it defines the human needs and desires that a company’s products and services fulfill.”

This report discusses results from a study of over 1,500 U.S. employees across 39 industries on purpose in the workplace.

Highlights:

  • Considers leaders’ role in purpose-driven organizations, especially in their communication and decision-making.
  • Identifies team leaders and coaches as holding the greatest potential to help employees identify and translate their individual meaning and purpose into the organization’s purpose.
  • Discusses the role of younger generations in shaping the purpose conversation.

“The old labor contract between employer and employee – the simple exchange of money for labor – has expired.”

This article discusses results from the Meaning and Purpose at Work Report and asserts that people highly value meaningful work.

Highlights:

  • Identifies that more than nine out of ten employees are willing to trade a percentage of the earnings for greater meaning at work.
  • States that many companies fail to leverage the power of meaning at work despite its many benefits to both employees and organizations.
  • Recommends a series of actions companies and leaders can take to support and foster a sense of meaning and purpose throughout the organization.

Additional articles for your reading pleasure:

  1. A Time to Lead with Purpose and Humanity,” Joly, H., Harvard Business Review, 2020.
  2. From Being Purpose-Led to Foster A Toxic Culture: Why Companies Like Away Fail to Live Up to Their Promises,” Bulgarella, C., Forbes, 2019.
  3. Balancing Profit and Social Welfare: Ten Ways to Do It,” Craig Smith, N. & Lankoski, L., INSEAD, 2018.
  4. Creating a Purpose-Driven Organization,” Quinn, R.E. & Thakor, A.V., Harvard Business Review, 2018.
  5. The Purposeful Company,” Chapman, C., Edmans, A., Gosling, T., Hutton, W., & Mayer, C., Big Innovation Centre, 2017.
  6. Purpose-Led Organization: ’Saint Antony’ Reflects on the Idea of Organizational Purpose, in Principle and Practice,” White, A., Yakis-Douglas, B., Helanummi-Cole, H., & Ventresca, M., Journal of Management Inquiry, 2016.
  7. “The Business Case for Purpose,” Keller, V., EY Beacon Institute & Harvard Business Review, 2015.

1 U.S. Employers Cut 701,000 Jobs in March,” Morath, E. & Chaney, S., The Wall Street Journal, 2020.
2 ’Sudden Black Hold’ For The Economy With Millions More Unemployed,” Cohen, P. & Hsu, T., The New York Times, 2020.
3 Today’s Logistics Report: Shipping’s Demand Shock; Hiring for Logistics; Delivering The Gas,” Page. P., The Wall Street Journal, 2020.
4 The Conference Board Consumer Confidence Index Declined Sharply in March,” The Conference Board, 2020.
5 Want a Purpose-Driven Business? Know The Difference Between Mission and Purpose,” Cook-Deegan, P. & Cotton Bronk, K., Fast Company, 2018.
6 Your Company’s Purpose Is Not Its Vision, Mission, or Values,” Kenny, G., Harvard Business Review, 2014.
7 Ibid.
8 Meaning and Purpose at Work,” Reece, A., Kellerman, G., & Robichaux, A., BetterUp, 2018.
9 Distilleries, Perfume Plants Turn to Making Hand Sanitizer to Fight Coronavirus,” Golgowski, N., HuffPost, 2020.
10 Automaker Retools With Health Supply Companies to Make Masks, Ventilators,” Aubrey, A., NPR, 2020.
11 2018 Cone/Porter Novelli Purpose Study: How to Build Deeper Bonds, Amplify Your Message and Expand Your Consumer Base,” Cone/Porter Novelli, 2018.
12 Ibid.
13 Put Purpose at the Core of Your Strategy,” Malnight, T. W., Buche, I., & Dhanaraj, C., Harvard Business Review, 2019.
14 The Four Levers of Employee Experience to Create Sustainable Results,” Garr, S. & Freitag, K., RedThread Research, 2019.
15The Potential and Promise of Purpose-Driven OrganizationsJohnson, S. S., American Journal of Health Promotion, 2019.
16 Ibid.
17 Meaning and Purpose at Work,” Reece, A., Kellerman, G., & Robichaux, A., BetterUp, 2018.
18 North Star: Purpose-Driven Leadership For The 21st Century 2017-2018 Global CEO Study,” Gyori, C., Sharp, L., Busch, C., Brahman, M., Kazakova, T., & Gyori, B., Leaders on Purpose, 2018.
19 The Potential and Promise of Purpose-Driven Organizations,” Johnson, S. S., American Journal of Health Promotion, 2019.
20 How Not to Define Your Purpose,” Malnight, T. W. & Buche, I., International Institute for Management Development, 2019.
21 The Force for Good Spectrum: Using Business as a Tool,” Singh, J., INSEAD Blog, 2020.
22 North Star: Purpose-Driven Leadership For The 21st Century 2017-2018 Global CEO Study,” Gyori, C., Sharp, L., Busch, C., Brahman, M., Kazakova, T., & Gyori, B., Leaders on Purpose, 2018.
23 The Business Case for Purpose,” Keller, V., EY Beacon Institute & Harvard Business Review, 2015.
24 2020 Global Talent Trends: Focus on Futures,” Mercer, 2020.
25 BlackRock’s Message: Contribute to Society, or Risk Losing Our Support,” Sorkin, A. R., The New York Times, 2018.
26 The Purposeful Company,” Chapman, C., Edmans, A., Gosling, T., Hutton, W., & Mayer, C., Big Innovation Centre, 2017.
27 To Be Successful, Your Business Should Lead With This,” Martin, M., Forbes, 2018.
28 Triple Bottom Lines: What Are They, How to Implement Then And … Should You? Rudowski, E., Medium, 2018.
29 ESG Metrics in Incentive Plans: Europe and North America Compared,” Boreham, P., Passin, G., Schloth, P., Mercer, 2020.
30 Best Practices in Social Return on Investments,” SoPact, 2020.
31 What Are B Corps?” Dunbar, M. F., Conscious Company, 2015.
32 One Questionnaire, A Multitude of Uses,” S&P Global, 2020.
33 ISO 26000 Social Responsibility,” International Organization for Standardization, 2020.
34 2020 Global Talent Trends: Focus on Futures,” Mercer, 2020.
35 GRI G4 Guidelines and ISO 26000: 2010,” Buck, B., Espinach, L. & Söderberg, S., Global Reporting Initiative & ISO, 2014.

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