Annual reports of all companies say every year that they are committed to society. That this is met with cynicism is another matter. When companies talk of purpose, it is interpreted as being a promotional vehicle to make them feel virtuous and look good to the outside world. People are sceptical of what goes on within the organisation in contrast to what they speak.
Do managers know what ‘purpose’ is? This is what Ranjay Gulati explores in his rather evocative book, Deep Purpose. Purpose is normally mixed with other statements like ‘mission’, ‘vision’, and ‘values’ that adorn websites of companies. But leaders may not understand what it really means and pay only formal obeisance to the concept of ‘purpose’. It is the same as what companies in India do for corporate social responsibility, which is more of a tick mark for regulatory compliance. A deeper, thoughtful purpose helps leaders set and achieve goals, not to mention go after a long-term vision. In other words, purpose is a key part of unlocking the company’s growth.
Gulati shows how companies can embed purpose in their DNA in a decisive manner, thus delivering impressive performance benefits that reward customers, suppliers, employees, shareholders, and communities alike. But how does one go about this? Gulati says to get the purpose right, leaders must fundamentally change how they conceive, relate and execute it. Leaders must start with purpose when discussing strategy, so that there is alignment with their activity. They must practice what the author calls ‘deep purpose’, which is what each organisation reasons for being more intensely, thoughtfully, and comprehensively than ever before.
The author takes us through the paths taken by some of the world’s most purposeful companies to understand the secrets to their successes. He deeply examines a set of 18 companies that have been shortlisted from a larger universe. Gulati points to Microsoft’s Satya Nadella, PepsiCo’s Indra Nooyi, Gotham Greens’ Viraj Puri, LEGO’s Jorgen Vig Knudstorp, Etsy’s Josh Silverman as examples. He shows how leaders can pursue purpose more deeply by navigating the inevitable trade-offs consciously and effectively to balance short and long-term value. This also ensures that the commercial aspects of an organisation are not compromised.
Interestingly, there are times when societal purpose and financial performance diverge in the short-term. In such situations, leaders need to pursue profits to ensure a business’s long-term viability and impact. That’s logical, but it can also be used to justify expedient decisions—involving laying off workers or abandoning sustainability commitments.
Imperfect but necessary trade-offs can take many forms. Some big firms invest in socially beneficial projects knowing fully well that profits might not materialise for a number of years. Investors temporarily lost out while customers or communities benefitted. On the other hand, some social ventures made decisions that temporarily hurt employees or the environment. One green agriculture company that was revolutionising food production reluctantly used plastic packaging because none of the alternatives were practical. An online retailer had to lay off employees to thrive financially and pursue social objectives. In both cases, these short-term sacrifices hurt, but everyone won in the end because of a disciplined commitment.
A deeper engagement with purpose holds the key not merely to the well-being of individual companies but also to humanity’s future. With capitalism under siege and relatively low levels of trust in business, purpose can serve as a new operating system for the enterprise, enhancing performance while also delivering meaningful benefits to society.
Deep Purpose directly addresses several pressing leadership questions of our time—including how to weigh financial performance and societal impact, how to talk about purpose most effectively, how to establish a strong culture, and how to successfully have individualist and inclusive workplaces.
The author identifies four ways that purpose delivers superior business performance. The first is directional where purpose guides the company’s growth. Buhler, for example, sought to slash waste and energy and water usage at its customers’ plants, which unlocked deeper partnerships and focused its innovation efforts. The next two are relational and reputational, where having a long-term purpose fosters trust with clients and partners and boosts the reputation of firms. The last is motivational where research shows that when companies take meaningful actions in line with purpose, employee engagement improves.
With a well-developed purpose leaders can be more than just operators— they become inspirers. And that goes for not only inspiring employees in their day-to-day tasks but also to work toward their own deeper purpose. That’s how leaders cultivate and grow their teams while also building a purpose-driven company from the ground up. Gulati borrows from Stanford University professor James G March who always said that the world needs “leaders as both plumbers and poets”.
How can one evaluate this book? Coming from an academician it is well researched and written. But the core value that is espoused is idealistic and leaders may find it hard to follow what is said here even if they believe in it. With changing business environment and competition, making commercial compromises may be difficult. Yet this is what all CEOs should read and try to imbibe.
Madan Sabnavis is chief economist, Bank of Baroda
Deep Purpose: The Heart and Soul of High-Performance Companies
Penguin Random House
Pp 276, Rs 799