Purpose Beyond Profit

How purpose drives growth and innovation

Paradoxically, it turns out that the most profitable companies are not those most focused on profit. It is those organisations whose focus is on purpose who are making the big bucks, delivering shareholder value whilst attracting and retaining the most talented employees and loyal customers.

I ran a beyond profit organisation from 2004–2012 called Learning Without Frontiers. It grew very rapidly, mobilised a global community, hosted legendary events and then imploded. My mistake was that I’d failed to unite my fellow shareholders, those with fiscal control over the business, to think beyond profit.

Purpose is the magic word here.

Recent research resulting from a collaboration between EY (the cool new brand for Ernst & Young) and the snappily named Harvard Business Review Analytic Services (an independent sponsored research unit within the Harvard Business Review Group, a journalistic bible for business heads) reports that:

“Organisations where purpose had become a driver of strategy and decision-making, executives reported a greater ability to deliver revenue growth and drive successful innovation and ongoing transformation.”

Whether it is money or purpose that gets you up in the morning the report, which you can download here for free, is worth reading.

The purpose vs profit debate isn’t even a new one. As reported by Simon Caulkin in the FT recently, the EY/HBR report reprises the work of Jim Collins and Jerry Porras who in their 1994 book, Built to Last, identified a group of “visionary” companies — those guided by a purpose beyond making money — who returned six times more to shareholders than explicitly profit-driven rivals.

Surely, “six times more” is a multiple that would make, the fictional 1980s Wall St character, Gordon Gecko blush. Although admittedly, “purpose is good” doesn’t have the same visceral Hollywood movie quality as “greed is good”.

Systems thinking brainiac, John Seddon, wrote in his 2005 book, Freedom from Command and Control: Rethinking Management for Lean Service, that in every organisation:

“there is a systemic relationship between purpose (what we are here to do), measures (how we know how we are doing) and method (how we do it)”

Seddon is an excellent antidote to management fads and to whom I am grateful for his effective skewering of management consultancy nonsense such as “Deliverology” and “Six Sigma”. He makes a good fist at adapting the lean, continuous improvement philosophy of the Toyota Production System (TPS) to industries beyond manufacturing. Seddon identifies that satisfied customers are the only source of long term success and that measures need to be related to purpose as defined from a customer point of view.

This focus on purpose and human-centering, in terms of design that drives these measures, is also at the heart of organisations such as IDEO who use a design-based approach to helping organisations in the public and private sectors innovate and grow.

In organisations without purpose beyond profit decisions become detached from the interests of their customers. It’s how we end up with horse meat in our burgers or car manufacturers cheating on emission tests.

Deloitte’s “Culture of Purpose” series provide some valuable insight. Their global CEO, Punit Renjen, puts it like this:

“An organisation’s culture of purpose answers the critical questions of who it is and why it exists. They have a culture of purpose beyond making a profit. An organisation’s culture of purpose answers the critical questions of who we are and why we exist through a set of carefully articulated core beliefs. A culture of purpose guides behaviour, influences strategy, transcends leaders–and endures.”

Purpose inspires confidence that fuels investment, innovation and long-term performance.

Purpose on its own won’t ensure organisational success but, where it is clearly expressed and understood, it sets the North Star by which methods to get there can be designed and progress measured. Whether your organisation is a commercial or social enterprise, understanding its purpose and the problem it strives to solve is the basis of understanding the social, customer and financial value that it must create to be successful.

If this is beginning to sound like new age hippy dung here’s what Paul Polman, CEO of Unilever, has to say on the future of capitalism:

“We have a unique opportunity to create a world that can eradicate poverty in a more sustainable and equitable way. That is very motivational. Business needs to be part of it. Corporate social responsibility and philanthropy are very important, and I certainly don’t want to belittle them. But if you want to exist as a company in the future, you have to go beyond that. You actually have to make a positive contribution. Business needs to step up to the plate.”

Polman recognises that, in addition to customer and financial value, building social value is a vital metric for business success implicit in Unilever’s vision “to make sustainable living commonplace”.

An organisation’s purpose shouldn’t be confused with its mission or, for that matter, its vision. A mission is what it does. A vision is what it would like to be. A purpose is why it does it.

None of this is intended to mitigate against financial sustainability. An organisation, to be successful over time, must generate profit. But in order to generate profit, it must have a focus that is beyond profit. It must focus on how it serves its customers, on how it hires, retains and develops the best employees, the relationship that it has with stakeholders and the relationship that it has with the communities that it lives and works in. This is its North Star, this is its purpose.

Please touch the 💚 symbol to recommend this story so that others in your network see it and I will feel joy, and don’t forget to follow so you don’t miss further updates. Please share via your favourite social networks.

I talk for money, if you’d like me to present this work in a keynote for your conference or meeting please get in touch.

An entertaining & thought provoking slayer of sacred cows, Graham Brown-Martin works globally; coaching founders, leaders and leadership teams to help organisations adapt in the face of rapid change & innovation. By challenging entrenched thinking he liberates teams to think in new ways to solve complex challenges. His book Learning {Re}imagined is published by Bloomsbury and he is represented for speaking engagements via Wendy Morris at the London Speakers Bureau.