The importance of having a shared understanding of what the purpose means for the business
A key starting point for this shift in the role of Boards to act as ‘trustees’ of the purpose is a shared understanding and belief by members of the Board that being purpose-led creates a better business that is better for society. Unless there is a shared understanding at the Board level of what being purpose-led means, and a shared commitment to it, there is a risk that the company lacks clear direction and that purpose is seen as merely a tick box approach to governance and reporting.
Engaging the leadership – exploring questions and dilemmas – explores the importance of a shared understanding in the leadership team and discusses how to go about this. Much of this is also relevant to Boards if the purpose is to outlive the tenure of the CEO and to enable the Board to carry out its role in providing effective oversight.
The 2018 FRC code and Wates Principles, both highlight the importance of purpose, require a Board to establish the company’s purpose, values and strategy and satisfy itself that these and its culture is aligned. But they provide little guidance as to what having a purpose really entails and what difference it might make to the company and the way it operates day in and day out. So it is probably not surprising that the FRC observed in their first report on the adoption of the new Code by FTSE 100 companies, that too many companies substituted what appeared to be a slogan or marketing line for their purpose or restricted it to achieving shareholder returns or profit. If Boards are to invest in this change there has to be a genuine understanding of what purpose is and why it needs to lead.
Blueprint’s paper Purpose for PLCs – Time for Boards to Focus outlines why purpose is important and what it really involves and is helpful in discussions with Boards.
This Enacting Purpose Initiative report Enacting Purpose within the modern corporation – A Framework for Boards of Directors also stresses the importance of the Boards having a shared understanding of what the purpose means for the business and how it connects to the strategy, and that the Board needs to “own” the purpose.