There’s a big conversation going on in the world right now about organisational purpose. In this Pulse, developed in collaboration with LRN, we aim to get under the skin of what this actually means for the 275 CEOs we spoke to, and share our perspectives into the kind of commitment and investment that effectively pursuing purpose requires.
The CEOs we spoke to confirmed what we suspected: purpose is not just a trendy buzzword of the moment. On the contrary, CEOs see their companies’ purpose as shaping both their strategic framework and their corporate culture to deliver enduring success in increasingly difficult and uncertain times. They recognise that purpose has the power to engage and inspire employees, increase customer satisfaction, and enhance financial performance. But, at the same time, they acknowledge that this is often easier said than done. What are the real-world challenges CEOs face as they embed purpose through their businesses?
In short, purpose requires companies to have a clear and genuine conviction as to why they exist. A sound purpose not only orients an organisation’s long-term strategic goals, but also catalyses employees, consumers, and external stakeholders to join their cause. Done well, purpose is a driver of business decisions and company growth. It should be integrated across and within strategy, operations and systems, to the point where an organisation and its purpose no longer seem separate. Organisations that have successfully implemented their purpose do not have a purpose; they are their purpose. Pursuing purpose authentically and comprehensively may seem daunting, but the CEOs we spoke to say it’s worth it. Whether or not it’s an easy road to travel, however, is a different story.
‘Purpose’ is open to interpretation and means different things to different people. We asked CEOs taking part in this Pulse to think about purpose as “a shared aspiration for our world that justifies why your organisation exists.” With this in mind, 9 out of 10 told us their company has a clearly stated and defined purpose (holding true across all regions and industries). And this strategic intent already filters through into behaviour for the vast majority: 96% of CEOs said it’s important for leaders throughout a business to take the time to explain how their company values influence business decisions in support of purpose. What’s more, 83% told us they were confident their company values guide decision making and reinforce purpose at all levels across their organisation.
Nearly two thirds of CEOs told us that emphasising purpose within their business had helped improve the top line: 63% indicated it contributed positively to revenue growth compared to just 4% who felt it had detracted. But this is only part of the puzzle and only one measure of performance. As well as improving revenues, CEOs told us that purpose helps build better employee engagement, brand reputation and customer loyalty, as well as attracting new business partners.
CEOs are placing a premium on doing good, not merely doing well. 93% told us that ‘doing the right thing’ (in other words demonstrating commitment, transparency and responsibility) is important in engendering trust among external stakeholders, and the same proportion believe they need to build recognition among customers and clients of the strength of their company’s values. This effort extends beyond fulfilling regulatory requirements: 92% of CEOs interviewed for the Pulse survey said promoting ethical behaviours and principles that go beyond external compliance requirements was important to their organisation’s success. This link between purpose and performance is further supported by LRN’s HOW Report, which looks at the characteristics and performance of organisations with purpose, character and inspirational leadership. Here, purpose was found to be highly correlated with performance metrics, including market share, business results, and customer satisfaction.
Purpose, then, is about far more than just increasing profit. It becomes the organising framework around which all the other parts of a business – think strategy, talent, risk and governance and stakeholder relations – are aligned.
Even as most CEOs buy into the importance of purpose for business success, they admit to challenges in translating it into action, operations and business as usual. They see the usefulness of a guiding purpose in good times, but are less sure of its value in making decisions in bad times. And, while purpose can inspire behaviour that goes beyond compliance requirements, many CEOs are still wary of giving employees too much freedom to ‘redefine the rules’. CEOs might embrace purpose in a visionary sense, but their employees don’t always see how their day-to-day work contributes to that overarching vision. This presents an opportunity for leaders to do more to communicate and instil purpose in organisational instinct, disciplines and culture.
More than half of CEOs told us that short-term operating pressures and business goals presented a serious challenge to implementing purpose within culture and strategy. This isn’t surprising. Embedding and operationalising purpose and values can be difficult, especially when things go wrong. Only 21% of CEOs strongly agree that purpose comes first in their company’s decision making during a crisis, and just 24% of CEOs say they are fully confident their company would reward whistleblowing on bad corporate actions or going outside the chain of command to raise a concern. This suggests that businesses still have a way to go to fully realise the broad power of purpose. Having a strong sense of purpose at a time of potential weakness can help rebuild trust in a business by reassuring those within and outside of the organisation that, even in the most difficult times, the company will behave in the way they expect.
It follows that employee engagement is central in putting purpose into action. But companies acknowledge this goal is difficult to achieve: half of CEOs believe their employees have difficulty in connecting their work to their company’s purpose and values, and 67% feel their companies lack an understanding of how to translate purpose and values into concrete actions and behaviours. This may be because employees are not always brought on with purpose in mind: only 28% of CEOs thought that attracting employees committed to seeing a purpose in their work was very important.
A lack of connection to an organisation’s purpose presents a formidable challenge; a purposeful business only goes as far as its people are willing to carry it. As the agency of culture behind any product or service, employees should embody the beliefs, behaviours and values that underpin organisational purpose, if that purpose is to be sustained. And here’s where it gets ‘sticky’. Ultimately, the problem that CEOs face is one of beliefs versus actions. While 96% believe that embedding a strong set of values that influence how employees act is important to the success of a company, 59% of CEOs acknowledge that embedding those values requires the most effort to achieve. It requires reinforcement through recruitment (attracting the best talent or those whose values aligns to that of the business), development, and rewards strategies. In this regard, there may be scope for companies to create better competitive advantage through their talent strategies and disciplines (just 21% of CEOs strongly agree that their corporate HR practices fully reinforce company values while only 16% strongly agree that their initiatives around people and culture foster the behaviours necessary to achieve their strategic goals).
CEOs highlighted size, legacy and complexity as key barriers to success. They recognised that galvanising a large and complex organisation around a new way of thinking is itself a large and complex undertaking.
CEOs regard the size and complexity of their organisations as key challenges in making purpose effective throughout their businesses. And the larger the company, the greater the challenge. Inspiring and encouraging a company’s stated purpose is much easier when there are fewer employees, fewer silos and fewer external stakeholder relationships to manage. This point is underlined in LRN’s HOW Report which found that only 29% of employees in large organisations described their leadership as exhibiting an ability to “enlist all employees in a commitment to a shared purpose,” compared with 38% of employees in medium-sized organisations and 42% of employees in smaller ones. Similarly, only 18% of employees in large organisations saw their leadership scaling company values. This is likely to be down to the fact that CEOs of start-ups and small companies tend to have a direct and hands-on relationship with their employees, and small companies with a defined sense of purpose tend to encourage those employees to consider themselves invested partners in a shared set of values. As companies grow, it becomes harder to retain that kind of relationship and shared perspective. Matrixed organisations and complex conglomerates pose major cultural or process challenges. And, while many companies struggle to shape a sense of purpose in their everyday culture, larger company CEOs perceive instilling purpose as requiring more effort than other CEOs. The challenge of implementing purpose is therefore, in part, an issue of scale.
Legacy culture also plays a role in the challenge of implementing purpose. Two thirds of CEOs said legacy culture and ideas were hindering new ways of doing things. They also told us that the regulatory requirements facing big companies add an external challenge to making purpose work. Both of these challenges are consistent with and proportional to the issue of scale: the bigger the company, the more powerful the legacy, the more restrictive the regulatory environment, and the bigger the challenge they face. That said, a strong legacy can also be an asset in rekindling purpose once an organisation has grown. As large organisations look to infuse purpose throughout their operations and culture, many are looking back through their history to rekindle their origin story – that initial purpose – that made them successful in the first place.
A company’s relationships with its business partners is another area where CEOs struggle to implement purpose. Just 38% of CEOs believe working with outside partners who embrace their value system is very important (i.e. evaluating the compatibility of their ethics and compliance management systems), and only 28% feel the same way about evaluating the cultural fit between their company’s purpose and values and that of an M&A target or joint venture partner. Implementing purpose properly (along with the values and behaviours to be upheld) involves a good deal of upheaval, and often means reconfiguring existing structures and systems. This makes it difficult enough for CEOs to embed purpose and values into their own organisations, let alone making a potential partner’s values a condition of doing business or evaluating cultural fit during transaction due diligence. But not doing so has the potential to harm companies not only in their pursuit of purposefulness, but also in short-term gains (think of CEOs’ shared stories of terminating business relationships because of ethical breaches, which may have been avoided had they put purpose and values at the forefront of the deal).
Size, legacy, and complexity are challenges to organisations trying to pursue purpose. But, for those that already have succeeded, these are assets, not liabilities. Large and complex organisations can use their size to reinforce and protect their purpose—once established across all departments and locations, the sheer expansiveness of the business makes purpose easier to maintain. And, when purpose is heavily entrenched in a complex organisation, escaping or acting outside of the purpose becomes more challenging. The same rules apply for legacy culture: if that culture places purpose at the forefront of decision making, employees and leaders will face barriers in putting short-term goals before long-term, purpose-aligned agendas.
There’s no single quick fix when it comes to implementing and embedding purpose into the fabric of an organisation and its people. And, not surprisingly, most challenging of all, is implementing purpose at scale, and so creating a purpose-driven, values-led organisational culture.
Five questions at the heart of success:
An organisation’s purpose provides a roadmap for navigating a changing and uncertain world. It also acts as a compass—purpose doesn’t only guide how to make decisions, but also which decisions are worth making at all. Purpose keeps organisations oriented towards their long-term goals, and, in doing so, we believe it can help organisations succeed as a whole. Truly purpose-driven organisations have the potential to see their employees more engaged, their customers more satisfied, and their business outcomes improved against their competitors. Companies that have embedded purpose throughout their culture and business relationships are likely to be equipped to sense and understand the currents of change taking place both in their sector and in society. These companies have the gravitas, confidence and authenticity to demonstrate they can deliver what they stand for.
That’s why organisations that pursue purpose primarily as a profit strategy will fail to realise its true benefits. Consumers, employees, and external stakeholders can detect when a purpose exists only to improve the bottom line, and this runs the risk of rendering the purpose inauthentic. This is not to say that companies lacking purpose will inherently fail, nor that possessing an authentic purpose is by itself sufficient for success. Neither is entirely true. On the one hand, as global trends of increased transparency, automation, globalisation, and interconnectedness fundamentally reshape how businesses operate, organisations without an authentic purpose will find it more and more difficult to succeed. On the other, purpose cannot be merely declared—it must be institutionalised, operationalised, and contextualised to be effective. This is the true challenge for businesses: not only to pursue purpose, but to fully embody it. The risks and challenges may be substantial, but the rewards are promising. Not only do stakeholders notice, strategies reorient, and businesses outperform when purpose is pursued wholly and authentically, but the world also is better off. The CEOs have spoken: the challenges are real, but the results are worth it.
This Pulse was developed in collaboration with LRN as part of our strategic relationship and shared goals to better help organisations elevate behaviour, define and scale their values and become animated by purpose. Learn more about how PwC and LRN can help your organisation discover purpose and drive strategy.
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