LinkedIn: Purpose leading strategy
Dee Corrigan, Head of Corporate Engagement, A Blueprint for Better Business
Purpose is essential in building a better business. Well understood, the purpose of a business is the North Star which guides the business, its strategy and inspires those who work in, and with, the organisation. It is the key to ensuring that the business is better tomorrow than it was today, better still in a years’ time and even better in five years’ time.
Being purpose-led is a commitment to creating profits only by creating value for society and by showing respect for the dignity of each person. However, we often see companies fail to fully realise this commitment. One of the ways companies fall short of their commitment to being purpose-led is through the development of its strategy. This can happen for a variety of reasons, here are a few patterns and best practices we have observed in our engagements with FTSE100 companies:
Overcome siloed thinking
Purpose-led business creates value by serving society through its core business. A company’s purpose shapes all the activities it’s involved in.
A common temptation is to think of purpose as “social purpose”, distinct from the core business and manifesting only in tangential social goals. For many companies, the impact of persistent siloed thinking is that purpose gets stuck as a bridge between business as usual and the legacy CSR programmes. This challenge frequently occurs in organisations with a strong history of CSR. With siloed thinking, the purpose may supercharge a company’s CSR initiatives but it will fail to realise the full potential value a truly purpose-led organisation can create for society and all stakeholders e.g. the potential to explore new forms of innovation and revenue. A similar issue can occur with sustainability. In some companies, we have witnessed distinct CSR, sustainability and purpose strategies.
For purpose to be effective, it isn’t about simply rebadging existing initiatives, purpose must direct and shape the business model and the strategy, what products and services are provided, to whom and how. The financial and non-financial outcomes and impacts from the strategy also need to tie back to the purpose. It will take time to put into place, but the direction of travel must be clear from the outset so that the business will seek to think in an integrated way, and sustainability and responsibility become aspects of a single core strategy, led by its purpose. Easy to say, hard to achieve! One early step an organisation may consider is to move CSR and/or sustainability teams into the strategy function in the organisation. Another is to facilitate a discussion to explore the relationship and difference between the various approaches (e.g. Purpose and ESG) and desired outcomes.
Finally, we can often overestimate what we can achieve in a year and underestimate what we can do in 10 years, be clear on your intent to have an integrated purpose-led strategy and make a sustainable plan to get there.
A purpose fit to lead strategy
If a company’s purpose (why it exists and supporting narrative – commonly defined in a statement) is too broad, then almost any strategy can be consistent with it. A broad purpose also avoids the reality of trade-offs, making purpose-led decision-making in complex dilemmas near impossible. To lead strategy a company’s purpose must be practical and authentic, connected to the core business and clear enough to guide strategy for example about what products and services are produced, what the company might stop or start doing, or what assets are acquired, retained, or disposed of.
While defining the companies purpose, and developing its purpose statement, we recommend taking an iterative approach, central to which is testing how a suggested purpose statement may guide difficult strategic decisions in complex scenarios. This also helps road test the leadership and board commitment to being purpose-led. In his book Growing the Pie, Alex Edmans states ‘a purpose that tries to be all things to all people offers little practical guidance because it sweeps the harsh reality of trade-offs under the carpet.’
A good purpose is not just about the existing business, but also the future, it inspires long term strategic commitment, investment and radical innovation, creating opportunities and markets that didn’t exist previously. It’s the answer to the question:
How is the world a better place by your company being successful?
The best articulation of a company’s purpose acts as a north star for strategy, stretching the company to always generate value for society.
Move beyond investment decisions based on financial return only
In navigating by purpose rather than by maximising profit, a company frees itself from the shackles of having to justify every investment by a calculation. In developing a purpose-led strategy, profit becomes a vital fuel that powers the purpose of the organisation, not the sole goal. This way of thinking means that purpose-led companies often invest more, ‘making decisions with judgements rather than calculations’, states Alex Edmunds (Growing the Pie, P197). He continues, ‘the clearer the purpose the easier it is to judge whether an action furthers it.’ The deeper the understanding of what it means to be purpose-led across the leadership and board, the stronger the commitment is to invest in activities that support the company’s purpose, creating new possibilities even if the traditional financial-led business case is not clear-cut.
Clarity and understanding of purpose give a company strategic flexibility, enabling quick adaptation and investment to change circumstances without losing coherence – as responses to the Covid-19 crisis demonstrated.
Embrace tough decisions
With the growth in popularity of Purpose it is often seen as a synonym for altruism, but this isn’t what “purpose” means – if I do something “on purpose”, I do it deliberately. Purpose brings coherence to strategy and investment decisions.
A purposeful business cannot be all things to all people, it is discerning about outcomes it aims to achieve and intentionality of its actions. Truly being purpose-led is about facing tough decisions. Thus the strategy of such a business must be clear about what a business will not do — otherwise, it is not a strategy. It will forsake a bad business line (a large retailer selling products in single-use plastic when recycling options are available), even if that line is profitable, in order to pursue new opportunities which are consistent with a purpose that benefits people and the planet (a retailer partnering with manufacturers to collect, recycle and refill packaging).
BP revised strategy sees the company cut its oil and gas production by 40% by 2030 and increase its low-carbon investment from current levels of US$500m/y to US$5bn/y by 2030 to reach its net-zero goal by 2050 or sooner.
The acid test of a purpose-led strategy must therefore be: what did you stop doing? What did that sacrifice enable you to do instead? And why was that more purposeful? There is no frictionless “win-win” in becoming purpose-led, and usually, some existing profitable activities will need to stop, while other opportunities to innovate will arise.
Collaborate to develop strategy
The power of purpose to inspire and motivate people can only be realised if people are truly part of the process of developing both the purpose statement and the strategy that follows.
Of course, from our experience, we recognise it’s important to set the intention to become purpose-led from the top, but a purpose-led organisation also recognises that everyone has the desire to contribute ideas to strategy development and are collaborators in fulfilling its purpose.
In addition to limiting ideas and contributions, another consequence of not involving colleagues in the development of a strategy is the tendency for people to replace strategy with metrics. We have noticed that once the metrics to measure the strategy are defined, the conversation can shift to focus on how well the company and teams measure against the metric and the purpose is all but forgotten in the day to day operations of the business. This ‘surrogation’ can undermine the strategy and any desire and commitment within the organisation to become purpose-led. More broadly be mindful not to ‘control’ or ‘solve’ for purpose through measurement and metrics. These are important inputs but not the whole solution.
The team leading on the strategy development must hold the tension of balancing a deliberative, top-down approach with the openness and curiosity of an inclusive approach, ‘shaped by colleagues rather than merely executed for them’ (Alex Edmans, Grow the pie, page 223). This may slow progress initially but by including all employees in the development of the strategy they develop a deeper understanding of how the strategy supports the purpose, are more likely to make day-to-day decisions that support it and can appreciate how the metrics represent the thinking behind the strategy, not the strategy itself.
Let go of power
Collaboration requires not only trusting, listening, and being more inclusive but also being prepared to let go of power.
There can be a misconception in organisations that strategy represents the brainwork; execution, the menial work. This can endow teams leading on strategy with a sense of authority. And while this authority may appeal to a desire and drive to create a real and positive impact it can ultimately limit the overall effect. This power dynamic, real or perceived, can blindside the most brilliant and considerate strategist.
In developing a purpose-led strategy, foster an environment of shared responsibility and see the development of the strategy as part of the process of cultivating a purpose-led culture, not above it.
Bring the ‘permafrost layer’ on board
Middle management, sometimes seen as the “permafrost layer” or ‘clay layer’ are frequently blamed for purpose and strategy ‘getting stuck’. The view is often that middle management” just don’t care enough”.
The narrative that middle management is inherently bad needs to shift. It’s worth asking ‘who or what is freezing them’? And what role can the way in which the strategy is developed plays into shattering these barriers? This can open up a much more meaningful, effective, fruitful conversation about what blockers the companies are putting in the way that is stopping middle from committing. All too often what becomes immediately clear is that middle management is the group that is stuck with the unresolved tension between purpose and profit. They are being asked to inspire their teams about the strategy and purpose, but they also retain the pressures of meeting short-term financial targets or cost-cutting objectives. As one director noted, ‘it is as if we are asking them to pat their head and rub their tummy at the same time.’ People cannot commit if they are getting contradictory information.
Engage stakeholders in strategy development
‘An enterprise is a network of relationships, which it must nurture and grow, not just a nexus of contracts’
Alex Edmans, Grow The Pie
Blueprint’s Five Principles seek to represent business as a series of dynamic relationships between people rather than an in-animate nexus of prescriptive contracts between different parties. If these relationships are contributing to their full potential, in support of the purpose of the business, it can stimulate collaboration and innovation. However, often in strategy development, companies fail to recognise the potential contribution of stakeholders, treating them as sources of or roadblocks (instrumental) to profit maximisation.
Alongside employees, the supply chain, customers, communities can all be sources of ideas, collaborations and innovations in fulfilling its purpose. Recognising stakeholder as partners in the development of a company’s strategy shifts the nature of the relationship from an extractive/contractual one to a generative relationship based on respect and dignity. And for generative relationships to be sustained also requires a commitment to ongoing dialogue with stakeholders about what matters in particular when navigating difficult decisions.
Embrace healthy, creative conflict
While a common Purpose can bring coherence to strategy, this must not at the detriment of people’s sense of autonomy or the entrepreneurial spirit in a company. This tension often surfaces in organisations that have historically grown through acquisition for example. There can be a tendency to unwittingly constrain people’s creative spirit and autonomy, turning purpose-led organisations into ‘cult-like’ environments or perceived to be overly controlled by the centre. While we believe it is important that a company’s Purpose (North star) creates cohesion, it’s equally crucial that people and business units are able to express their own individuality in a purpose-led environment as otherwise, we can lose much of what is unique and vital about us. This capacity for vitality is central to enlivening organisations and unlocking the innovation and latent creative potential within organisations, creating new possibilities.
If there is strong resistance, stay curious, seek to understand why there is resistance and be open to and challenged by what can emerge. If a strategy is being led by a central team it is crucial that business units contribute bringing their differences into healthy dialogue with the central team and other business units.
“There is an art to flocking: staying separate enough not to crowd each other, aligned enough to maintain a shared direction, and cohesive enough to always move towards each other. ”
Adrienne Maree Brown, Emergent Strategy
Board engagement is key
In a purpose-led company, the role of the Board is to be the collective trustees of the company’s purpose. Any board discussion, review and sign-off of strategy ought to be anchored to the company’s purpose with a shared understanding of what it means to be purpose-led.
It’s also worth reviewing how subcommittees of the board contribute to strategy development and value creation, and not solely concerned with remuneration, risk and nomination (a legacy of the exclusive focus on shareholder returns).
Putting people at the centre of being purpose-led
In Blueprint’s view “purpose-led” is two things:
- An orientation of the whole business around the positive impact it seeks to have in the world reflected in what it says, what it does and how it does it (the common good)
- Understanding that a business is essentially a set of relationships– both internally and externally – where each person is seen as “a someone, not a something”, and where the long-term success of the business – from a societal and business perspective – crucially depends on the quality of its relationships, founded on respect, dignity and dialogue
Both elements are crucial. Focusing solely on developing a purpose statement and strategy without thinking about people and culture is to undermine the transformational power of purpose.
Finally, the importance of ‘being’ in the ‘doing’
Which brings me to the final point, when embarking on developing a purpose-led strategy, keep in mind that ‘the world we want to create is the way in which we can create that world’ (How to shift your mindset and choose your future, Tom Rivett-Carnac).
Inspired by Blueprint’s framework and principles, one CEO I met has a copy of it on his desk at all times and practices one of the behaviours outlined in the framework a fortnight at a time. He recognised that how he shows up is an important catalyst for change within the organisations and across the industry. And that behaviours in the framework help create the habits and therefore the conditions for people and purpose to flourish. This CEO remarked that by focusing on one behaviour at a time, it made it easier to develop the other behaviours too. This is because all these behaviours are oriented towards the two basic principles: promoting human dignity and the common good.
I love how beautifully the superb strategist Christina Figures illustrates this point :
“As we learned during our stewardship of the Paris agreement, if you do not control the complex landscape of a challenge (and you rarely do) the most powerful thing you can do is change how you behave in that landscape, using yourself as a catalyst for overall change. All too often in the face of task we move quickly do ‘doing’ without first reflecting on ‘being’ – what we personally bring to the task as well what others might, and the most important thing we can bring is our state of mind.”
“The Future We Choose”
Having a clear purpose that directs strategy, and integrates sustainability and responsibility into it is hugely helpful in instilling confidence. And without a credible plan for the business to be sustainable the risk is continuous doubt throughout the business – a growing fear that can close minds to change and opportunity. But there is also a risk of focusing too much on strategy at the expense of the less visible and patient work of cultivating the conditions where people can thrive.
One of the things that inspires me about Blueprint’s way of thinking is that at the heart of it is a story about ourselves that challenges us to be our best selves, to find more meaning in our lives individually and collectively. And to see the workplace, where we all spend so much of our lives, as social organisation, where we can thrive and where we can champion the potential of people, business and society.
What inspires you about Blueprint’s Framework and Principles?
What patterns and best practices of strategy development are you observing?
I am very grateful to Alex Edmans for the insights shared in his book, Grow the Pie: How Great Companies Deliver Both Purpose and Profit. And to John Featherby for his recent provocation, We Must Think Deeper
I not a fan of stock photography so with the artist permission I used a photo of this postcard purchased last weekend at an open-air market. www.sendmethispostcard.com