Leading with Purpose: The New Organizational Advantage

Leading with Purpose

Companies that are winning the war for talent are providing meaning, value and purpose to their teams and their stakeholders. Their leadership, culture, and purpose inform how they are perceived in the market, drive rewarding employee experiences, and may even change the world.

Purpose-driven organizations

Purpose is a company’s reason for being. It drives the culture, directs strategy, and is often the glue that holds an organization together.

Purpose, along with an employer’s brand and value proposition differentiate organizations competing for increasingly scarce and increasingly selective top talent.

Purpose unifies management, employees, and communities. It drives ethical behavior and creates an essential check on actions that go against the best interests of stakeholders. Purpose guides culture, provides a framework for consistent decision-making, and, ultimately, helps sustain long-term financial returns for the shareholders of your company.

Larry Fink, Chairman and CEO, Blackrock Investments 2019 Letter to CEOs

Ynzo van Zanten, speaker at our 2019 European Conference, is Chief Evangelist at Tony’s Chocolonely, a company founded and focused on a single purpose: making all chocolate 100% slave-free, worldwide. That purpose has fueled tremendous growth and the fierce loyalty of employees, customers and the supply chain. Van Zanten explains, “For a company like ours, having such a clear mission—making sure that all chocolate worldwide is 100% slave free— is so clear cut that people look up to that. It is such a clear mission, which is so positive; actually enabling people to make a change in the world. That is why our employer brand is so strong.”

And the impact on employee retention for Tony’s? “In the early years, it was around 100%,” van Zanten says.

A report on a Harvard Business Review Analytic Services’ global survey, “The Business Case for Purpose,” found that purpose-driven organizations had a better ability to drive innovation, transformation and revenue growth. “Purpose-driven companies make more money, have more engaged employees and more loyal customers, and are even better at innovation and transformational change. It seems to be easier to win the game when you care about the game.” (“The Business Case for Purpose,” Harvard Business Review, 2015)

When it comes to top talent, John Ryan, US Regional Vice President for TRANSEARCH International says, “Talent will make choices that reflect their values.”

Impact of a strong employer brand

The competition for talent is fierce. According to Ryan, “In some regional markets and in some industries, unemployment isn’t 3%. It’s 2%. It’s that tight. So there is a war for talent, and talent cares where it works and it cares about how it’s treated.”

In his work with clients and executive candidates, Ryan sees a pattern. “Individuals who make a career transition care quite a bit about an employer’s brand. Some of the things that people look for include paternity leave, work hour flexibility, the ability to work remotely or work around children’s sporting and school events.” He says, “People will ask us whether the company promotes all individuals, regardless of gender, ethnicity and so forth.”

A good employer brand is a powerful advantage in the competition for top talent. Van Zanten says of Tony’s, “I don’t think we are ‘competing’ for anything. When we have a job opportunity, we only need to put it on our social media, and we have hundreds of applicants immediately, which are good applicants. And we also use our network of the employees that already work at Tony’s.”

What makes Tony’s an employer of choice? “We are a company with a very, very clear mission which has done its best in the last 15 years to make it easy for people in a fun way to indulge themselves while still doing something good for the world,” van Zanten says. In short, “People want to feel like what they do has meaning.”

Ryan adds, “I do a lot of recruiting in renewable energy. There are a lot of companies, for example, Google, that are really driving a clean energy, carbon neutral energy strategy, and it comes from the top. The people who run Google actually care about sustainability. It’s not an economic decision, but an ethical and authentic decision to try to be carbon neutral.” As for an employer’s brand driving recruiting, Ryan says, “It’s Google, and who doesn’t want to work at Google? But that’s the kind of thing that makes a company like Google an employer of choice, if somebody has options.” And top talent always has options.

What talent wants: the evolution of expectations

Top talent is choosey. Job security and benefits packages with decent healthcare, matching retirement contributions and accrued annual leave are important, but they are not everything. Candidates want to know about the employee experience, whether they’ll be supported in their career development, and if they’ll feel proud to be associated with the company they join.

“Executives look very carefully and very intently at the employer brand of the company,” Ryan says. “If the company has a brand for treating its employees well, adding in special amenities like onsite daycare, flex hours, working from home, paternity leave, and some other things that are family friendly, these things really do become part of the brand of the company. And that might separate a company like Patagonia or Nike from a Merrill Lynch or GE.” He adds, “With successively younger generations, there is also a rising demand with respect to social responsibility.”

Talent is also looking for authenticity. According to researchers Robert E. Quinn and Anjan V. Thakor, “we have come to see that when an authentic purpose permeates business strategy and decision making, the personal good and the collective good become one. Positive peer pressure kicks in, and employees are reenergized. Collaboration increases, learning accelerates, and performance climbs. (Harvard Business Review, July-August 2018) Ryan warns, “It’s also easier now to leave a toxic culture or a brand people don’t believe in.” He says, “It’s harder to hold onto really talented people. If you’re not treating them well, and if there are hypocritical elements in your culture that they can’t stomach, people will just leave.”

Candidates no longer have to trust what a company says about itself to identify a company’s culture and values. The proliferation of online reviews and the internet itself provide copious, accessible information.

Anthony Abbatiello leads the leadership and succession practice at Russell Reynolds Associates. “In the age of increased transparency and accessibility of information (think Glassdoor, LinkedIn, Yelp), jobseekers and employees are more empowered than ever to question not only what a company does, but more so, what it stands for. It’s critical for talent to map how a company’s values relate to their own set of value drivers. And because of this shift, we’re seeing companies focus quite substantially on their culture and how senior leaders embody a core set of values that ultimately shape the employer brand value proposition.”

Change is upon us

In many cases, enterprises are tilting away from a focus on profit alone.

In his 2019 letter to CEOs, Larry Fink, chairman of investment firm Blackrock wrote, “As wealth shifts and investing preferences change, environmental, social, and governance issues will be increasingly material to corporate valuations.”

The Business Roundtable, nearly 200 CEOs of some of the world’s strongest brands, recently issued a statement on “the purpose of a corporation,” redefining their decades-old definition and arguing that companies should no longer advance only the interests of shareholders, but also invest in their employees, protect the environment, deal fairly and ethically with their suppliers and contribute positively to their communities.

The pace of change, greatly driven by technology and globalization, continues to accelerate and organizations are beginning to realize that not only must they shift with societal changes, but they can also be a driver of positive change.

A Harvard Business Review study in partnership with Spencer Stuart, “The Leader’s Guide to Corporate Culture,” finds that a purpose driven culture “is exemplified by idealism and altruism. Work environments are tolerant, compassionate places where people try to do good for the long-term future of the world. Employees are united by a focus on sustainability and global communities; leaders emphasize shared ideals and contributing to a greater cause.”

For van Zanten, “If you simply sit back and watch evolution go by, we can see that companies that put only their shareholders first and financial success first, I am convinced, they will die out in the next generation.”

It may be the next generation that kills them.

In The New Wave: Next Generation Executive Talent, an AESC study and survey of more than 850 business leaders worldwide, ‘building a mission-driven culture’ ranked in the top three ways organizations can attract and retain next generation executive talent. According to the study, the next generation of executive talent “will be looking for a reflection of their values and having that mirrored in a way that speaks to them authentically, and part of that authenticity is both ‘getting’ and responsibly contributing to the world they live in. Next Generation talent will see through any masquerading and will shun organizations that just focus on their bottom line without any focused thought or strategy on how they impact society.”

Mercado Libre, Latin America’s most popular e-commerce site, is fast becoming known as an employer of choice by young talent across Argentina, Brazil, Chile, Colombia, Mexico and Uruguay. The company ranked in the top ten in last year’s “World’s Best Places to Work 2018.” So, what’s the recipe for an effective culture at an organization like Mercado Libre? According to the report:

“Continuous growth, development, and curiosity is part of the Mercado Libre (MELI) culture and self-directed learning is a clear reflection of its entrepreneurial DNA. Aligned to the ever-changing evolution of the tech industry, MELI encourages disruptive learning. Learning isn’t the only focus area at MELI; they are also committed to creating and supporting sustainability programs. Its programs fall into three categories: planet, social development, and education and entrepreneurship. It is taking actions to become a carbon-neutral organization and it partners with more than 600 NGOs, including those that provide education to underprivileged youth to those that support community development. MELI supports work-life balance by providing many programs for new mothers and fathers, including parental leave, nursery rooms, flexible work arrangements without pay reduction, and childcare programs.”

Companies are changing, and next generation talent wants something more.

What can companies do?

Abbatiello explains, “At the organization level, it begins with formulating a clear vision and culture that defines your employment brand. Nowadays, employees want to feel like they are part of something bigger than themselves. Organizational values or mission statements shouldn’t just exist on coffee mugs and employee handbooks —they should drive the ‘what’ and ‘how’ for a business’s commercial operations and societal impact.”

When asked what advice he’d give companies today, van Zanten says, “There is a diplomatic answer, and there is an activist answer.”

“If you look at the changes around us about the impact humanity has on the world, the impact that commerce has had on the world in the last two generations, there is an unstoppable change coming where I think that purposeful companies are the only companies that actually have a reason to be, now or within the next generation. So that’s my faithfully activist answer. And my diplomatic, economic answer will be, look at the success of the purposeful companies in the last decade compared to companies that lack any form of purpose. I think you also see the economic success and financial success of those companies.”

An insights piece by Russell Reynolds Associates, “Social Purpose: Lessons from Leaders,” states:

“Social purpose is strategy. But finding a collective spirit is probably the most significant single factor in embedding it in the heart of business. Social purpose must be the will of the CEO—yet it cannot only be the will of the CEO. It needs dedicated resources—yet it can lose steam if tucked into a technocratic sustainability team. To that end, executives at leading companies encourage collaboration on the specifics of the strategy, rather than a top-down edict.”

Employee engagement is key. Take Mars’ climate action initiative campaign #PledgeForPlanet which includes concrete measures to engage Mars’ staff, along with suppliers and consumers, with climate action. In addition to the public campaign, Mars’ staff not only helped set the strategy, but will also be active participants, using a digital tool, modelled after the UN’s ActNow Climate “bot”, which teaches them about lifestyle choices to minimize their carbon footprint.

Purpose or Profit: A false choice

Organizations do not have to choose between doing good and doing well. Consider Unilever, whose most sustainable brands grew 69% faster than the rest of the business and delivered 75% of its turnover growth in 2018.

“Even if you don’t give a damn about the world falling apart beneath our feet, there is a very viable economic ground of becoming successful on the basis of doing something good for the world,” van Zanten insists. Tony’s Chocolonely is a prime example, he says. “We are commercial as hell, but we use commercial forces to do something right in the world. We have shareholders that probably profit immensely from this. But we also profit in a sense from our chocolate; we have people in the supply chain that become more happy than they were.”

“We show that you can be financially successful and still take responsibility for your moral obligation to do something right for society and the people in the world around you,” van Zanten says.

An organizational imperative

Companies can’t afford to ignore the importance of their employer brand. The impact that organizations have on their stakeholders and communities is in full view. Customers, employees, even investors are exercising their right to choose what brands and organizations they want to be associated with.

“Companies with less-than-ideal brands, frankly, are going to have trouble attracting and also retaining top talent. If a company is getting a lot of low scores for employee development, general culture, working conditions, flexibility and things like that, it's going to miss out on some great people,” Ryan says. “Employers might be surprised at how much due diligence candidates are conducting when evaluating a company. Many have mentioned reading reviews on Glassdoor, and bad ones steering them away from a potential opportunity.

Van Zanten says, “A company’s greatest asset is its talent, but a company’s greatest meaning is to make a difference. And the greatest talent nowadays wants to feel that meaning in their day to day job.”

According to Abbatiello, “It is the responsibility of senior leaders to embody these values, become culture carriers, and hold people accountable for making the organization a great place to work…and this has a clear trickledown effect on how prospective employees come to view companies.”

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