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How Executive Teams Shape a Company’s Purpose

For us at Contexis, one of the joys of working in the purpose space is building partnerships with others who share our values and beliefs in the power of purpose to transform organisations and the experience of people working with them.

One of these is with Ron Carucci, best selling author and co-founder and managing partner at Navalent, who works with CEO and executives pursuing transformational change. Ron has recently co-authored, with Garry Ridge , a fantastic article for HRB on the key strategies leaders can use to bring purpose to life in their organisations.

You can read the full article here.

An effective, aligned, and committed executive team — the governance mechanism that shapes the story of an organization unlike any other team — is central to shaping and sustaining impactful corporate purpose.

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White Swan. Why purpose lies at the heart of corporate resilience.

90% of CEOs don’t believe their business is moving fast enough to survive.

How can an activated purpose provide the guide rails for innovation?

Buzzwords like innovation certainly galvanise activity. But how often does that activity end with the design of lackluster goods and services? For a market that doesn’t really need them, and their existence adding a net negative impact to society? In 2011, Jack Springman, a strategy consultant, dared suggest, in an article published in the Harvard Business Review, that we drop the word “innovation” from our vocabulary altogether. And yet, this word continues to headline corporate initiatives to signify progress, resilience and organisational health.

Purpose provides the guard rails and fertile ground for thinking.

The word “innovation” comes from the Latin word “novus” meaning new. To create something novel is often the goal of most innovation initiatives. But new does not always translate into value. Businesses that genuinely place purpose at the center of its strategy are fundamentally challenged to rethink deeply who, and indeed, what it considers stakeholders, and the ultimate beneficiaries of its business. Such a challenge comes without a well-trodden path, without clear boundaries, and as highlighted by some of the corporations listed on Fortune’s 2021 Change the World List, without precedent in their industry.

A active purpose underpins the risk framework and decision-making process across an entire organisation

So, what is the role of purpose in enabling long term value creation? Before answering that, let’s define active purpose. By this we mean an organisation’s stated purpose underpinning its risk framework and decision-making process across the entire organisation. Not just at the top. Purpose provides the guard rails and fertile ground for thinking. Just as entrepreneurs have been encouraged by thought leaders like Alexander Osterwalder to consider their customers’ needs through a value lens, so too does an active purpose provide the support and reassurance to know that the thinking is aligned with the intention. Without this alignment employees have no way of determining whether their decisions support the organisation’s vision. What a wasted opportunity.

Data from the Contexis Index shows a clear and linear relationship between an activated purpose and effective innovation.

With an active purpose, these same colleagues are tuned into the needs and values of the wide range of stakeholders the business is serving. Data from the Contexis Index shows a clear and linear relationship between an activated purpose and effective innovation. On average, for every 10 percent increase in purpose engagement, we see a 6 percent increase in openness to ideas. And the effect is broadly common across cultures and sectors. Individuals who identify with the organisation’s purpose record levels of openness and learning at least twice as high as those who do not. By extension, organisations that activate purpose are far more successful at innovating than those for which purpose is no more than a statement.

In practice, what we’ll see is that employees develop a deep empathetic knowledge of what each stakeholder needs in order to thrive. Once these needs are seen, they are difficult to unsee. Whether that be “Plant a Tree” initiative to replace the tree stock that is required for your paper products; rethinking service delivery to minimise carbon footprint; employing marginalised groups; or at an individual level delighting a colleague when they need it most.

It has long been recognised by leaders that the solutions for many of the challenges faced in a business are held in the minds of those working in the frontlines every day. A purpose that informs how these employees think, feel and act (all of which points to ownership of purpose), will no doubt result in breakthrough value-adding initiatives, and not just an idea sitting on a shelf. Importantly, as highlighted by the pandemic, active purpose strengthens organisational agility – an increasingly important marker of corporate resilience in an era of volatility and uncertainty.

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If how to shift to remote working sustainably and successfully is the question; Purpose is the clear answer

COVID-19 has forced an unprecedented shift to dispersed and remote working for organisations across the globe. Whilst some see this as a temporary response to a crisis, what David Solomon CEO of Goldman Sachs has referred to as “an aberration”, the more forward-thinking have chosen to use the crisis to adapt to a new way of working.

This could be a once in a generation shift in health and happiness. Getting it right offers the prospect of offering more flexibility, higher productivity, better work life balance – and lower cost and environmental impacts.

The notion of putting 7,000 people in a building may be a thing of the past”. Jes Staley, CEO Barclays Bank

But there’s a problem. Most organisations are finding they are not terribly good at managing remote teams in a way that keeps everyone connected, motivated, productive and happy.

The purpose effect

Emerging research suggests that there may a solution to the problem. One that is already available to any organisation with the courage to adopt it. That answer is an authentic purpose.

To explain why this could be so, let’s start by exploring the evidence for purpose. Data from the Contexis Index® of Organisational Performance, analysed by researchers at University of Cambridge, provides compelling evidence that an authentic purpose drives human happiness and organisational performance across ages, genders, levels of seniority, nationalities and cultures.

The Contexis Index® uses behavioural science from globally leading academic practitioners to assess those employee beliefs and behaviours known to be most closely associated with motivation, happiness and organisational and commercial performance. The analysis then measures each employee’s attitude to organisational purpose. And assesses key factors of cultural mediation to arrive at a set of numbers and analysis that: (i) measures purpose activation in organisational culture and (ii) explains how that purpose is working to enhance beliefs and behaviours across demographic groups in the business.

Put simply the Index measures purpose and shows how it’s actually working in real organisations globally.

The stand-out conclusion of the research are that people, everywhere in the world, who believe their organisation to be purposeful are up to twice as happy, connected, committed and productive than people who don’t.

Awareness is meaningless. Authenticity is everything

It is also clear that these feelings and behaviours are not the result of a purpose statements or a set of words – but of actions. Awareness of purpose has minimal impact. People must feel the organisation is authentically purposeful. They must experience the purpose in how the company behaves. For purpose to be alive to them it appears quite universal that people must:

· see the purpose lived in decision making, it must genuinely be the ‘north star’

· feel a strong sense of trust and psychological safety

· and that leads to feelings of ownership.

These three cultural attributes of clarity of context, trust and ownership appear to bring purpose to life for people and lead to the extraordinary increases in happiness and performance seen in the data. Without these three factors purpose seems to have limited impact on how people feel and how they act. Without authentic action purpose is, at best, a waste of time.

Remote working. This is weird.

So, what of purpose and the newly established army of home workers? Using data from the Index, remote, home-based workers were isolated from their conventionally office-based peers. It was anticipated there would be minimal differences. But the number were extraordinary. And not easy to explain.

Remote workers appear dramatically more sensitive than office-based colleagues to the impact of organisational purpose.

Which has huge implications for their commitment, ability to sustain autonomous work and their productivity. As well as on motivation and mental health.

Of course, we already know that employees who identify with organisational purpose are more engaged than average colleagues. But the impact of purpose on feelings of commitment and responsibility amongst remote workers are a remarkable three times stronger than amongst office-based peers. Their sense of compassion in the culture, which is key to trust, is also significantly raised.

Insights from the Purpose Collective

As part of efforts to understand these findings, members of the Purpose Collective were asked to describe in one word why they felt organisational purpose might have so much impact on remote workers. The results of approximately 55 responses are below.

It’s quite clear that the collective view of experienced purpose practitioners is that a stronger sense of organisational performance leads to high levels of trust, connection and belonging. A number of respondents also mentioned words around ownership, accountability and autonomy.

These results provide an interesting and informed perspective on what may be happening.

One of the leading researchers in the field of remote working is Tsedal Neeley (Naylor Fitzhugh Professor at Harvard). Neeley’s particular interest is in the impact of ‘social distance’ on motivation and effectiveness of working teams. She finds that “when people all work in the same place, the level of social distance is low. Even if they come from different backgrounds, people can interact formally and informally, align, and build trust. They feel close and congenial, which fosters good teamwork.”

One of the key conclusions from Neeley’s research is that trust is fundamental to any team; a conclusion which supports Dr Paul Zak’s work, with his research findings that high-trust cultures are 50% more productive, with team members experiencing 74% less stress and 76% more engagement.

Neeley similarly finds that “emotional connection among team members is lost through physical remoteness and that leads to an erosion of trust.”

The evidence from the practitioners in the Purpose Collective suggest a broad consensus that a belief in organisational purpose leads to significantly enhanced levels of trust and connectedness. It implies that what purpose is doing is effectively bridging the ‘social distance’ identified by Neeley.

what purpose is doing is effectively bridging ‘social distance’

This is an important and exciting conclusion and worthy of further research. Because, as Neeley makes clear, “mitigating social distance .. becomes the primary management challenge for the global team leader.”

If a shared sense of organisational purpose is providing the cues to trust and connectivity Neeley sees as the keys to bridging social distance, the implication is that an authentic and shared purpose is an essential ingredient in forming and sustaining remote and dispersed teams. If social distance is the key issue, purpose is the solution. And that may explain why we observe high purpose leads to high levels of commitment and happiness in socially distanced people.

Neeley does not have access to this new data and devotes limited focus to purpose but still concludes: “it’s important to remind team members that they share a common purpose.”

mitigating social distance .. becomes the primary management challenge for the global team leader.

Which appears to lead to one, inescapable conclusion. If we are to make a sustained success of the remote working that so many employers are suggesting is the future of work, organisations must strive for a clear and authentic purpose.

And we know from the Index that what this means is a purpose that is the authentic ‘north star’ of the organisation that forms the bedrock of decision-making and corporate behaviour; that this is enshrined in a culture of radical trust; and people are supported and encouraged to take personal ownership and responsibility for the lived purpose.

Without purpose, activated by these key cultural attributes, social distance will remain, and trust and connection will be lost – along with the hope for a new and better way of working.

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How are values driving a new form of leadership?

Why consider factors beyond making money in your strategic thinking?

I think CBA chairman Catherine Livingstone puts it best, “The bank has a significant presence in Australia which means we have responsibility to focus on the financial wellbeing of our customers and communities.” And from Georgia Nielsen of Sims Metals, “It isn’t driven by governments. It’s driven by each corporation’s values, and the strength of the leaders at the top.“

The strength of the leaders at the top. Nielsen is implying that to lead with your values intact takes strength. Through our own work with senior leaders at CBA we can see how values are driving a new form of leadership.

A brave leadership relies on some being the hero and many following fast. Leadership which stands up for what they know is right, not what has been done before.

And more than that about not letting what has been done before or ‘the way we do things around here’ get in the way of making values based decisions aligned with purpose.

Livingstone gives some illuminating, real live examples from CBA examples “For example, the financial abuse dimension of domestic abuse, financial literacy more broadly, mitigating the impact of disasters on people’s finances, encouraging customers to think about climate risks for their homes, which are usually their main financial asset.”

Question: What skills do you equip you and your team with to empower them to step up to this challenge?

And for those of you thinking, “Yep we’ve got those skills”

So then: What habits are built into your business practices to reinforce a supportive environment when leaders make values based choices regardless of outcome?

Boards understand that a purpose that lives is critical

“The report shows 81 per cent of ASX 100 companies have incorporated ESG metrics in their CEO’s remuneration. Across all industries, at least half of the Australian companies have incorporated ESG measures.”

However from a qualitative perspective, the 2020 KPMG survey of Australian CEOs showed there is still a disconnect between strategy and purpose; unbelievably 62% say that declining customer trust is not an issue for them and one in two (52%) of Australia’s CEOs (and 67% of CEOs globally) are concerned about their readiness to respond to a crisis. This tells us that tangible changes in what people do and how they do it within a business, activation, is more critical than ever. It will improve our readiness to respond to a crisis and mitigate the chances we need to do so within an unreasonably short a time frame.

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UK companies flunk their first corporate govenance review

Photo by Riccardo Annandale on Unsplash

UK Companies flunk their first Corporate Governance Review

Will the new Audit, Reporting and Governance Authority be sharpening its enforcement pencil?

UK companies just received a resounding ‘C Minus’ from the FRC and a ‘see me!’ in the margins of their Annual Reports from Sir John Thompson, CEO of Financial Reporting Council. This matters for all public and larger private companies. Not least because the FRC is becoming the Audit, Reporting and Governance Authority with, it says ominously, new powers to ‘engage with’ companies about governance reporting.

Purpose, culture, and strategy

This is the first year in which all UK premium listed companies reported on their application of the 2018 UK Corporate Governance Code (Code). And the FRC is unimpressed.

“As part of our assessment, we were looking for a high standard of reporting which demonstrated that boards had considered matters beyond process and reassessed issues such as company purpose, culture, and strategy, in order to set them at the heart of governance. Whilst we have found examples of good reporting, overall, we are disappointed with the response to the new Code.”

Strong stuff. And the FRC goes on “too often companies who are not compliant with the Code, do not declare non-compliance but offer vague explanations, and continue this pattern year on year. This approach demonstrates a disregard for implementing good practice and questions whether the leadership of the company is fully committed to good governance and transparency”.

“Too often the objective appears to be box-ticking at the expense of effective governance” says CEO Sir John Thomson. “This is a disservice to the interests of stakeholders, is not in the public interest and undermines trust.”

Crikey.

So, where is FRC (enforcement Authority in waiting) looking for improvements? “As a result of this year’s review”, they say, “we expect improved reporting in:

Companies to have a well-defined purpose and to clearly show the progress towards achieving it
Discussion of the issues raised, topics considered, and feedback received during engagement with shareholders and employees
Clearly show the impact of engagement with stakeholders, including shareholders, on decision-making, strategy and long-term success
Increased focus on assessing and monitoring culture, including consideration of methods and metrics used
Increased attention and better reporting of succession planning, diversity and board evaluation”

One clear thread emerges. And that is the failure to comply with:

Principle B that “the board should establish the company’s purpose, values and strategy, and satisfy itself that these and its culture are aligned”.

The Review finds that, rather shockingly, only 21% of Company Reports “described a purpose that was clear” and 76% failed to show how the Board satisfied themselves with the alignment of purpose with culture.

“Many Boards appear not to be exercising their oversight function to ensure that company purpose works as a driver for the company”

declares the FRC. Culture and purpose “should be led from the top and aligned with values and strategy as noted in Principle B of the Code”.

The FRC is clear that this is a strategic imperative and not a matter of marketing or reputation management. Boards that persist in misunderstanding that may get a sharper response in future. “Company culture supports the success of the strategy, and if a board embeds a culture that is supported by the employees, then companies should have a motivated and high performing workforce which delivers the outcomes necessary for long term success”.

This is all very well. But many Boards are left wondering “how”, particularly if they thought they’d actually met the requirement to ‘establish a purpose’.

Assess and measure purpose and culture

One key answer is in understanding the FRC’s thinking that companies are failing to assess and measure purpose and culture. Traditional Engagement Surveys “have significant limitations” according to the FRC and “few companies look beyond the figures to better understand poorer scores”.

Better companies, they say had “introduced specific culture surveys”.

Fortunately, Boards have a timely ally in a relatively new process of measurement and analysis created in a partnership between entrepreneurs and leading thinkers at Cambridge University. The Contexis Index® measures with precision how purpose is working to transform culture in real businesses in real time. It assesses where and why it is blocked. And provides detailed analysis and recommendations for practical action in every part of the business. There is no better way to understand and bring to life purpose in the business today. And satisfy the requirements of the Governance Code.

The Index has been adopted by organisations in 26 countries. It creates numbers that are robust. And analysis that is practical and actionable. As a Director in one large Bank commented

“The reaction to driving the sense of purpose has been dramatic, with our Index scores showing a significant improvement. This is reflected in how the team is interacting and the overall spirit within the team. The work we have been doing has shown fantastic results – an increase of 30% in positive behaviours across the business would see significant results within team engagement and commercial performance”

The CEO of a London-based Fintech agrees:

“without purpose, a company can only flipflop around without truly consolidated, effective effort. What Contexis has developed with its Index is a very clever way to measure the impact of Purpose on Performance, enabling companies to really motivate their teams. Contexis Index did it for us!”

As the new Authority burnishes its powers to enforce, Boards would do well to explore this new methodology. There is no better way to understand and bring to life purpose in the business today. And satisfy the requirements of the Corporate Governance Code

“In 2021 we will be revisiting our Culture report to support further improvements in embedding and monitoring culture” says FRC. We have been warned!

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Our first year as a BCorp. What did we do?

Click here to read all about it

It wasn’t easy to certify as a BCorp. To make the grade we had to think deeply about how we run our business and treat our people, clients, the wider community and planet. But we don’t see making it as a BCorp is the destination. We see it as a journey of improvement. This Report highlights the key things we’ve done over the last year to be a better business as a force for good.

If you would like to know more about BCorp you may be interested in this:

About BCorp

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Thinking of becoming a BCorp? Here’s a compelling reason why not.

Do you genuinely believe that the reason your business exists is to use its profits to positively impact employees, communities, and the environment? That’s a huge ask for most companies. And if you can’t answer that question in the affirmative, the long road to B Corp certification really isn’t worth the pain.

And painful and long it is.

Becoming a B Corp is bloody hard!

Which is as it should be. When the movement says “certified B Corporations are businesses that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose,” boy do they mean it. Becoming a B Corp is bloody hard. The standards of social and environmental commitments as well as governance and ethics of trading are far beyond any regulatory requirements. And the certification process to demonstrate these exist in the business is rigorous in the extreme.

All of which is saying that if you buy from, sell to, partner with, or apply to work for a BCorp, whether it’s Ben & Jerries, Body Shop or Beeswax Wrap Company, you know you are dealing with an exceptional business. A business that has had to demonstrate to its peers an extraordinary level not just of of integrity, ethics and social responsibility but also financial robustness.

So, what if you believe your business does exist to make a positive impact and not just money? Then, in our experience, the journey to becoming a BCorp hones and stress tests this belief beyond anything we could have foreseen. It makes you a better, clearer, more engaged business. A business full of people who know why they do what they do and are proud to do it. And it puts you in a community of like-minded business globally that inspire, support and love.

When we started our business several years ago, we wrote on our website ‘we believe that all businesses have a fundamental responsibility to protect and enhance the lives of the people who work for them, the societies we serve and the planet we share’. The process of becoming a BCorp has taught us the true meaning of those words. It’s been something of a humbling experience. And we’ve become a far better business; for our clients, our people and the societies we work within. What’s more, it’s a journey of learning and improvement we feel is only just beginning.

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About BCorp

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So, now we’re a BCorp. Was it all worth it?

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17% of your people would sabotage the business given a chance but it’s the 83% who don’t care enough to bother who should worry you

*Gallup

What does managing corporate risk mean to you? In most large organisations, particularly financial services ones, it’s mostly about processes and oversight structures designed algorithmically to detect fraud, prevent safety violations, or predict and circumvent human error before these end up as a crisis.

Culture, more than rule books, determine how a company behaves

Of course, it makes a sense to manage risk actively. Cock ups and criminality trash value and even destroy companies. But process is a small part of the picture. Everyone knows it’s people that cause the problem. We even have a name for it; ‘risk culture.’ But if that’s true, it’s also people that prevent bad stuff happening, or at least act swiftly to limit the damage when it does.

In other words, the beliefs and behaviours of employees either expose you to risk or save you from it. As Warren Buffett says “culture, more than rule books, determine how a company behaves.”

But the general view is that people are pretty weird and unpredictable. Certainly, most organisations seem peculiarly unable to get them all pointing in the same direction.

Yet, it turns out that something over 90% of people in your organisation are remarkably predictable. And the rest you can probably do without.

over 90% of human beings in a typical organisation are motivated not by self-interest but by a sense of joint and meaningful endeavour.

Chuck away your preconceptions about carrots and sticks and the theory of the rational actor and the evidence is pretty compelling. Once their basic needs for comfort and safety are met, just over 90% of human beings in a typical organisation are motivated not by self-interest but by a sense of joint and meaningful endeavour. Call it purpose, if you like. Of course, if you choose not to provide that sense of shared meaning, or you choose to undermine people’s sense of safety, people will default to self-interest. That’s fine if you want people to perform purely simple binary tasks. But it’s deeply ineffective if people have discretion and agency in what they are doing. It’s also a horrible way to avoid risk.

Which is why a clear and authentic purpose, at the heart of strategy and the lived experience of employees, resolves a lot of the problem of a poor risk culture.

Health check: operative words in the sentence above are ‘authentic’ and ‘lived’. This is not a quick fix. It’s not about ‘having’ a purpose and sticking it on all the mouse mats (do they still make those?). One thing that surprised us in our research across global companies was the extent to which organisations can achieve high purpose recognition amongst employees and still leave them entirely untouched in how they feel and behave. It’s abundantly clear that, in truly purposeful companies in which purpose is engaged in driving strategy and supporting human performance, purpose is truly alive in the experience of everyone in the business.

The key question therefore is ‘if that’s the key to effective risk management, how do you create a lived and experienced purpose?’ Our research shows that genuinely purposeful companies seem to have three key attributes embedded in their cultures that turn out to be critical in managing risk.

People care because they belong

Firstly, these companies exhibit a culture of ownership and responsibility that makes people, at every level, care because they belong. They own. Which means when something damaging happens or is likely, they care enough to do something about it because, emotionally, it is theirs. Emotional ownership appears to have a direct impact on both engagement (do I care?) and autonomy (enough to do something about it myself). And the easiest thing to feel ownership of is a purpose to be proud of.

They can articulate what the organisation believes in

Secondly, these organisations have in their purpose a clear articulation for what the organisation believes in, that this is inspiring to people whilst also being credible and congruent to what the business does for a living. And, critically, they have a commitment to authentically apply that purpose in how the business behaves and how decisions are made. That clarity of purpose cuts through confusion and guides how people behave and how decisions are made, right down the organisation, with laser-clarity and with real velocity. That means when damage occurs people are more likely to know how to respond and do so quickly.

They have built an enviroment of trust and compassion

Thirdly, and most critically, they have built an environment of trust and compassion. Which means people feel able to act for the good of the company and not to keep their heads down or protect their position because they fear ridicule or blame. In every company we have assessed, a big difference in trust is one of the key discriminators between a company where purpose is lived, against one where it is stated.

And critically, these cultural factors appear to work together.

I’m clear about why we do what we do, I’m proud of it and feel responsible for its success, and I’m not afraid to act on it to protect it and see us succeed.

Purpose is not a statement. It’s a living culture based on clarity, trust and ownership. If you don’t invest the time and energy in creating these cultural underpinnings to your purpose it will have minimal impact on your people. And that matters a great deal when it comes to managing risk. If I don’t really get ‘why’, if I don’t feel I belong or if I feel scared I’m spectacularly unlikely to bother to do much about it when I see a risk of harm to the company or respond quickly and in the right direction to reduce the damage.

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Yellow not with happy face ticked in front of group of people

Purpose, not profit, inspires companies to outperform

How do you know if purpose is working effectively in your culture. And if it isn’t, why not?

The single-minded purpose of business for the last 50 years has been simple; as exemplified in Milton Friedman’s maxim, it has been to generate profits for its shareholders. And it has been a spectacular success.

82% of wealth goes to just 1% of the population

Spectacular that is if you are an asset owner or senior corporate executive. Wealth has undoubtedly been created. But its concentration has been extraordinary. According to Oxfam, 82% of all the wealth generated in 2017 went to just 1% of the global population. It’s equally extraordinary that the consequences of that inequality were not foreseen.

As Paul Polman asks, “why should the citizens of this world keep companies around whose sole purpose is the enrichment of a few people?”

The tumbril or the mob?

Polman may not be threatening the tumbril or the mob but something just as terminal, if not as abrupt. And that is the creeping disillusionment and disengagement from businesses and brands by the societies they serve and the people they employ. In terms of disillusionment, according to Edelman, just 52% of people globally now trust business to do what is right. And as for disengagement, only 13% of people feel their work is meaningful (Gallup).

Just 52% of people globally now trust business to do what is right

Far-sighted business leaders see the threats and are responding; seeking to build businesses that hold to a purpose beyond shareholder return. A purpose that seeks to also create value for employees, consumers, communities and planet. This is not CSR. Nor is it reputation management. It is bringing a social purpose to the heart of business strategy. Surprisingly, this is nothing new but simply a return to the principles of business as a servant of society and the common good first articulated by Adam Smith.

A new model for capitalism?

According to Andrew Edgecliffe-Johnson, writing in the Financial Times (Jan 2019), this shift to a more holistic view of the purpose of business is “starting to converge into something that looks like a new worldview, shared by leading executives and investors and shaped by an unlikely alliance of consumers, employees, campaigners, academics and regulators”. In Edgecliffe-Johnson’s view, this could “break a consensus that has governed business for two generations and offer a new model for capitalism based on the watchwords of purpose, inclusion and sustainability”.

Society is demanding that companies, both public and private, serve a social purpose.

That is quite a claim. Certainly, it is the moral duty of business to serve society and not just the narrow interests of shareholders. Even Larry Fink, at the head of the bastion of capitalism that is Blackrock says “society is demanding that companies, both public and private, serve a social purpose.” But is this just a moral argument? Could doing the right thing actually be more than that? What if pursuing a pro-social purpose not only benefits society and planet, not only supports the wellbeing and fulfilment of employees, but actually enhances business performance and value creation?

Where’s the beef?

Larry Fink goes on to say “to prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” This idea – that purpose creates performance – is rapidly becoming mainstream. But hold on. Is there really any evidence that this is the case? And, more importantly, can it be shown precisely how this process works in real businesses?

There is scepticism that the full impact of something as nuanced as purpose can be measured. Metrics are “the soft underbelly of the ESG movement,” warns Martin Whittaker, chief executive of JUST Capital.

Yet, the need exists if this is genuinely to be ‘a new world view’, as envisaged by the FT. EY’s Chief Executive, Mark Weinberger, predicts that the metrics around social and people performance will someday be as important to the Big Four as financial audits are today. But “nobody has yet devised a way to measure purpose that is as simple as the bottom line of a profit and loss account”.

Metrics around social and people performance will someday be as important as financial audits are today.

Yes, it is possible to measure purpose

It was to address this deficit that a global group of entrepreneurial practitioners and leading academics, led by Cambridge and Plymouth universities, has been working over the last three years. Specifically, this team aimed to answer two key questions: Is it possible to measure purpose; to create robust metrics of purpose impact? And, if so, can an empirical model show exactly how purpose works to trigger human and organisational performance and reveal where that impact is blocked?

At Contexis, we’ve always been fascinated with what drives human motivation and productive culture in organisations. Specifically, in the differences between agile, entrepreneurial businesses and scaled, legacy corporate ones. All of our careful observation of the differences fundamentally come down to one word – ‘purpose’. But not in the way you may think. It’s not about having a purpose. But what you do with it.

Yes, the best agile, entrepreneurial businesses are obsessively clear about why they do what they do. But that’s not the whole story. They also exhibit a set of specific cultural attributes that activate purpose to drive startling levels of human motivation and performance. And exactly those same cultural attributes are often suppressed in most scaled businesses – stunted by time, complexity and legacy.

It is these insights that form the basis of a new Model devised by the Universities with robust metrics that seek to establish reliable correlation and causality to show exactly how purpose is driving organisational cultures.

This is not a subjective, external view of purpose, nor is it based on proxy measures. It seeks to provide a clear metric of purpose performance that can be benchmarked internally, over time and against peer comparators. In other words, an Index of purpose effectiveness. It also provides an uncompromisingly accurate view of how purpose is working and where it is blocked in the real business, in real time.

It’s not purpose but its activation that matters

So, what does the Index reveal? It seems clear that an activated purpose galvanises specific positive human beliefs and behaviours. And it is this that results in enhanced business performance. Purpose has the power to maximise both human and business potential. It’s no longer a choice.

Employees who consider their employer to be purposeful are between 25% and 100% more positive than the median employee across a broad range of performance attributes. Think about that for a second; those people who believe you stand for something more than short term profit are up to twice as effective as the average employee. These people are, of course, more engaged. But they are also more autonomous, more open to ideas, more compassionate and more joyful. They are far clearer on strategy and make decisions faster. They are also around 50% less likely to quit their job. These are the people you really want in your business.

What triggers purpose is principally trust.

The key question is what characteristics in the organisational culture activate purpose to allow for these performance gains – and what is missing when purpose is suppressed. The answer is a combination of powerful human motivators, most particularly trust and emotional ownership. In other words, what triggers purpose is principally trust.

The honest conversation that transformed the humanity of a global Bank; and grew revenue by 15%

An example of this is provided by a major European Bank. The Bank had made purpose a top priority for its 150,000 people, and its stated purpose was well received in internal surveys. Yet it made little difference to engagement scores.

What had long been thought of as an engagement problem that could be resolved through driving purpose was actually an issue of fundamental distrust.

The leadership team couldn’t understand why purpose was not ‘working’ and decided to use the Index to find out. They were shocked with what it revealed. What had long been thought of as an engagement problem that could be resolved through driving purpose was actually an issue of fundamental distrust. The Bank’s Purpose was quite well understood. It just wasn’t believed or trusted.

The Index showed that less than 25% of employees really believed the purpose the Bank served. And, whether in terms of engagement, innovation, strategic clarity or happiness, those with a strong sense of the Bank’s purpose dramatically outperformed their peers. On the other hand, a sizeable minority of employees felt negatively about the Bank’s purpose. These individuals, concentrated in middle management, underperformed dramatically, particularly in terms of whether they trusted the Bank and its culture, whether they felt a sense of responsibility for its success, or understood and believed in its strategy.

The analysis was clear. There was nothing wrong with the Bank’s purpose. It just needed to be activated through a fundamental focus specifically on rebuilding trust, particularly amongst middle managers. The Bank took up the challenge, embarking on a structured programme of open conversations led by each team leader or Director.

Positive beliefs and behaviours jumped by an average 33%

The results were extraordinary. In teams taking part in the programme, positive beliefs and behaviours jumped by an average 33% after only 6 months of participation. In particular, the critical measures of trust, openness and compassion increased by 40%. Purpose was now working because it had been activated by trust; the negative purpose group had shrunk to less than 10%, whilst the high purpose group now represented over 50% of employees.

Most extraordinary of all, in a wholly surprising and unintentional consequence, revenues in the pilot teams had increased by an average of 15% in just six months. As the Director in charge of the pilot commented,

“we read these days that Purpose drives performance. In our case, this simply wasn’t true. What drove performance was actually trust in the purpose we serve. And that allowed our teams to take real responsibility for performance. In 30 years in the Bank, I cannot remember an initiative that has had anything like this impact. The commercial return has been extraordinary. But, more importantly, the well-being and sheer joyfulness of our people have been transformed.”

It’s not purpose but what you do with it that counts

What the Cambridge work and the Index results shows is pursuing a social purpose is more than a moral duty. Larry Fink is right to say purpose leads to performance. But pursuing ‘purpose’ without understanding the cultural attributes that activate it is at best a waste of time and at worst fundamentally damaging to the cultural fabric of the business.

The Contexis Index, for the first time, picks up the gauntlet thrown down by the FT to ‘measures purpose in as simple a way as the bottom line of a profit and loss account’. It shows that the key activator of purpose is not a set of words but the creation of a culture of trust and emotional ownership. And it allows organisations to identify accurately and with extraordinary granularity specific communities where the impact of purpose is blocked and to track the impact of interventions or communication on these individuals and to adapt these in real time to maximise the change and build cultures that are meaningful and productive.

As the director of a FTSE Pharma / Healthcare found

“this has fundamentally changed how we think about our people and their motivation. The clarity it’s brought has been extraordinary.”

By undertaking this analysis, companies also join others around the world in supporting important research into how purpose drives organisational performance by contributing wholly anonymised date to the University of Cambridge.

To find out more about how the Contexis Index can transform the impact of purpose in your business, and how you can help this important research please get in touch.

To find out more about the thinking behind the methodology you might enjoy this short EthWord film

White Swan. Why purpose lies at the heart of corporate resilience

Corporate resilience is at the top of agendas right now in most large organisations. Google it and you get 72 million results.

And no wonder. We’ve seen plenty of big organisations in recent years brought to the brink – or over it – by a derisory response to crisis.

“The world is getting riskier” says PwC. “Organisations are increasingly vulnerable as business becomes more complex, virtual and interdependent. Building and sustaining a resilient business is a commercial imperative.”

And yet an HBR study of 500 $1bn-plus companies found only 12% consider their culture of resilience to be successful.

And, make no mistake, this is an issue of culture not process. According to Forbes, the key things that derail resilience in the businesses they studied were all cultural; rigidity of hierarchy, lack of clarity, conflicting objectives with no clear prioritisation, and poor care of people.

We need a cultural answer to a cultural problem.

Which is where purpose comes in. We know pretty unequivocally that a clear and authentic purpose, at the heart of strategy and the lived experience of employees, resolves a lot of the problem of poor resilience. Please note, the operative words in that sentence are ‘authentic’ and ‘lived’. This is not about ‘having’ a purpose. In our research into companies globally it’s clear that companies can have a very high purpose recognition and still leave employees entirely untouched in how they feel and behave. Truly purposeful companies, in which purpose is engaged in driving strategy and supporting human performance, show a boots-and-all commitment so that purpose is truly alive in the experience of everyone in the business.

We don’t just know that purpose solves the problem. We know why. Our research shows that genuinely purposeful companies seem to have three key attributes embedded in their cultures that turn out to be critical in a crisis.

Trust, ownership and clarity are key

Firstly, they have built an environment of trust and compassion. That allows people to act for the good of the company in a crisis and not to protect their position because they do not fear sanction and blame. In all the companies we have measured, a massive difference in measured trust is one of the key differentiators between a company where purpose is truly alive, against one where it is simply stated.

Secondly, these companies exhibit a culture of ownership and responsibility that makes people, at every level, care enough to act and not wait to be told. Emotional ownership appears to have a direct impact on both engagement (do I care?) and autonomy (enough to do something about it myself).

And third, they have in their purpose a clear context for decision-making that cuts through confusion, establishes priorities and guides these actions with laser-clarity and with real velocity.

The easiest thing to feel ownership of is a purpose to be proud of.

And critically, these cultural factors appear to work together. I’m clear about why we do what we do, I’m proud of it and feel responsible for its success, and I’m not afraid to act on it. Looking at that Forbes list again, the complete opposite, in fact, of rigidity of hierarchy, lack of clarity, conflicting objectives, and poor care of people.

Who’s on your side?

And there’s one more thing. Authentically purposeful companies bounce back quicker from cock-up because the world is on their side; whether that’s customers, commentators or regulators. Think Nike. Think Southwest Airlines. There’s some brilliant examples of this in Lisa MacCallum’s great book Inspired Inc.

Purpose is not a statement. It’s a living culture based on clarity, trust and ownership. Failure to establish these cultural structures around your purpose pretty much guarantees that when crisis calls, which it inevitably will, it’s going to be extremely expensive. And horribly painful.

The problem with Inclusion? We don’t know what it means.

I was asked recently where I stood on the diversity vs inclusion debate. I hadn’t a clue – in fact I wasn’t even aware there was a debate – so I’ve been doing some reading. And found a whole load of confusion and muddle.

Part of the problem is that diversity and inclusion are so often bundled up so they look like pretty much the same thing. But they are, of course, quite different. It’s also true that diversity is pretty easy to measure. And inclusion isn’t. So I’m guessing there’s a tendency to measure diversity statistics and call it inclusion.

The difference between these ideas is hinted at in the etymology of the words. Diversity comes from the latin diverte (to turn aside), hence divorce. Inclusion comes from includere (to enclose). In some sense diversity is about what makes us different and inclusion is what brings us together.

What? How?

In a practical organisational sense, I have read diversity is the ‘what’ and inclusion is the ‘how’. But surely it’s more useful to think of diversity as who and inclusion as why?

A focus on diversity makes sure we are fairly representative. But fairness isn’t really the point. It’s about including all the talents and a rich mix of insight and life experience to make organisational cultures not just representative but vibrant and productive.

Why? – the single most powerful force in supporting inclusion

Inclusion seems to me to be about working out what gives meaning to this vibrant mix and brings everyone together in a cohesive team. Yes, in an inclusive company everyone is equally valued for their ideas. But that sense of inclusion is most powerful when it is driven from source – we all know why we are here and everyone shares in that sense of meaning – rather than outcome – we have systems and processes in place to ensure it happens.

Which makes it relevant to our research into organisational purpose and hence my interest.

What we know about purpose is that, done right, it’s the single most powerful force you can harness in creating clarity of vision, unity of intention and cohesion of cultures in an organisation. And that sounds a lot like inclusion.

Consider this. Taking all employees across a range of business types in a dozen countries around the globe, those who considered their organisation to be purposeful were on average 35% more joyful at work, 40% more engaged, 50% more aligned and they experience their company culture as being 70% more open and 100% more trustworthy than colleagues who do not feel the organisation to be purposeful. Which means, logically, purpose must be the single most powerful force in supporting inclusion in organisational culture.

Furthermore, it also means we can perhaps, for the first time, put some numbers on inclusion. What we have shown in our work with Cambridge and others is that the impact of purpose on how people feel and behave can be accurately measured. This is not about whether people are aware of organisational purpose. It is about showing the extent to which their beliefs and behaviours are altered by organisational purpose. Since we know purpose activation drives dramatically higher levels of engagement, alignment and trust, it follows that measuring purpose activation is an excellent metric indicator of inclusion.

If our aim in organisations is to benefit from a diversity of thought and ideas, it’s key that we not only bring in the right diversity of people but empower their creativity and drive through creating a shared sense of meaning and purpose. If diversity is the noun, inclusion is the verb. And inclusion can be ignited through a strong sense of shared purpose.

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looking down at running shoes on forest floor

90% of CEOs don’t believe their business is moving fast enough to survive

How do I create an agile, high performance culture? How do I engage and align our people? How do I drive productivity? Land strategy? Create trust in our business?

There’s an old story about two hikers who are confronted by a large bear in the woods. One calmly sits down, removes his boots and puts on a pair of running shoes. “What are you doing!” his panicked friend asks, “you’ll never outrun a bear.” “I don’t have to” he replies” I only have to outrun you”.

Whilst CEOs may be right that their business isn’t moving fast enough, they only need to go faster than the other guy. It’s therefore worth asking who is wearing the running shoes in your industry. Which are the agile businesses you face, and what are they doing that you are not?

The answer tends to be the businesses that are smaller, newer, less encumbered with legacy; in other words, the entrepreneurial ones.

Entrepreneurial thinking; a mindset not a legal entity

Yet, entrepreneurial thinking actually has very little to do with scale or age. It’s a mindset. It’s therefore worth taking a really close look at what entrepreneurially-minded businesses, of whatever size, actually do. How is that they create that agility of culture, productivity of people and performance of management. And can this be replicated?

In our experience, a big part of what drives agile business is a compelling and engaging purpose which is authentically and consistently held in the organisation. This engenders the behaviours of alignment and engagement in people, clarity and velocity in management, and openness and creativity in cultures which are the hallmarks of the agile, entrepreneurial business.

And that is the point: the first rule of purpose is that, for it to have any impact, it must not only be credible and congruent to the activities of the business. It must also be absolutely authentic.

Most large organisations have come to accept the importance of holding a purpose beyond profit or the immediate interests of shareholders. This may be from a genuine sense of civic duty, an understanding that society is demanding more of business, or a consciousness of the direction of travel of regulators and investors.

But a general view is emerging that a socially responsible model of business isn’t just a moral good but can actually lead to a more sustainably successful business.

According to the FT’s Andrew Edgecliffe-Johnson, this shift is “starting to converge into something that looks like a new worldview, shared by leading executives and investors and shaped by an unlikely alliance of consumers, employees, campaigners, academics and regulators”. which could “break a consensus that has governed business for two generations and offer a new model for capitalism based on the watchwords of purpose, inclusion and sustainability”.

This is great news. But there’s a problem. Even where adopting a more socially purposeful approach is fervently held by senior leadership, it is still a top-down exercise that struggles to penetrate much beyond the ExCO bubble.

For many organisations, it’s a mystery why their carefully considered purpose isn’t making a jot of difference to the behaviours in the organisation. Why there is a big gap between the purpose at Board level and the experience of employees and customers.

Entrepreneurially-minded organisations achieve agility not by having a purpose but what they do with it.

Careful observation of the best agile, entrepreneurial businesses provides some of the answers. They just use purpose in an entirely different way. These agile, entrepreneurially-minded businesses have a clearly defined set of attributes within their cultures that are the secret to bridging the ‘purpose gap’.

And that secret lies in the first rule of effective purpose; that it must be credible, congruent and absolutely authentic.

The first and most fundamental attribute in any agile, purposeful culture is TRUST

Which is why the first and most fundamental attribute in any agile, purposeful culture is TRUST. Companies where purpose lives and breathes tend to be open, compassionate and creative rather than inward looking, fearful and controlling. In more traditional cultures based on control, people are instinctively fearful and therefore distrustful of the purpose. Hence it has no power to change things for the better.

What drives trust is a marked difference in the organisation’s approach to people.

What drives trust, allows purpose to thrive and transforms cultures is the organisation’s approach to people. An example of this is provided by a major European Bank. The Bank had made purpose a top priority and it was well received in internal surveys. Yet it made little difference how people felt or behaved. The leadership team couldn’t understand why purpose was not ‘working.’ Research showed the Bank’s purpose was quite well understood; it just wasn’t trusted. In fact less than 25% of employees really believed the authenticity of the purpose.

The solution was nothing to do with ‘purpose’ itself, but rather demonstrating its authenticity and rebuilding trust by a fundamental reappraisal of how people were treated and encouraged to treat each other.

The results were extraordinary. In teams taking part in the programme, positive beliefs and behaviours jumped by an average 33% after only 6 months of participation. In particular, the critical measures of trust, openness and compassion increased by 40%. Purpose was now working because it had been activated by trust. Most extraordinary of all, in a wholly surprising and unintentional consequence, revenues in the pilot teams had increased by an average of 15%.

To find out more about creating agility through building a trust culture read here.

With trust comes the second major attribute of entrepreneurially-minded, purposeful businesses; a company-wide feeling of, and desire for, OWNERSHIP.

Unless everyone in the organisation feels – and feels allowed to feel – a powerful sense of ownership of the business it will not flow through into agile employee behaviours.

Organisations in which everyone feels an emotional investment demonstrate employee behaviours of alignment, engagement and autonomy. And the simplest and most compelling route to creating a culture of ownership is to create a feeling of ownership of the purpose the organisation serves.

Organisations need to reframe the relationship between the company and the employees from one of control to one of self responsibility

This is about a critical shift in how management at every level of the organisation thinks and behaves and about shifting the relationship between the company and the employees from one of control to one of self responsibility.

Research in a large pharma/medical group suffering from a significant problem of engagement and motivation uncovered an intriguing truth. Although disillusionment in most managers was resulting in ineffective decision-making and a critical lack of strategic implementation, a small group thought and behaved in an entirely different way. This group felt emotional ownership of the organisation an extraordinary 45% more strongly than the median manager, which translated into some remarkable differences in their commitment, effectiveness and willingness to take responsibility for successful outcomes.

And what made these managers different from their peers came down to one thing: the degree to which they believed in the purpose the business served.

It was clear that individuals who felt their company to be authentically purposeful (as distinct from having a stated purpose) had a far higher sense of ownership and responsibility, and were consequently dramatically more effective as managers (as well as, incidentally, being far more joyful and far less likely to quit). To find out more about creating agility through developing ownership and responsibility read here.

The final driver of entrepreneurially-minded businesses is the ability to manage in CONTEXT. Whilst trust drives cultural agility, and ownership drives engagement and autonomy, the ability to manage in context defines how effectively and efficiently management behaves.

Contextual Management creates clarity, adaptability and, above all, velocity in management decision-making.

An increasingly volatile, uncertain, complex and ambiguous world requires a significant amount of adaptability; and that is something that entrepreneurial management is all too familiar with. Whether because of the speed of development, newness of the market or paucity of resources, entrepreneurial management has long been adept at navigating an ambiguous world. The key skill entrepreneurial management demonstrates is the ability to make decisions contextually to create clarity and direction rather than getting bogged down in the content. And this is a skill that can be taught.

Where management uses a clearly articulated purpose as the context for key decisions, within an environment of trust and where the whole team is willing to take responsibility, it creates enormous velocity. It also ensures the purpose links the business up from top to bottom. To find out more about creating agility through managing in context read here.

It’s easy to agree that purpose is a good thing for employees and for society at large. But with the life expectancy of a S&P 500 company down to 15 years, it’s also easy to identify that the behaviours of aligned, engaged staff, open, innovative cultures and agile, clear-headed management are the key to survival.

The problem is the gap between purpose and behaviour.

Without the entrepreneurial attributes of trust, ownership and context, muddle, distrust and cynicism will persevere in middle management and purpose will not take root. What drives the extraordinary agility of the best entrepreneurial businesses is not ‘having a purpose’ but that purposefulness is credibly, congruently, consistently and authentically lived in the organisation. It is that which unlocks the human capital in the business allowing both people, and the business itself, to achieve their full potential.

Without these entrepreneurial ways of thinking no business can hope to be agile. It will always be outrun. And in a volatile, uncertain, complex and ambiguous world the bear is very large and very real.

To find out more about how the Contexis Index can transform the impact of purpose in your business, and how you can help this important research please get in touch.

To find out more about the thinking behind the methodology you might enjoy this short EthWord film