When purpose meets passion, what does it mean for business?
Can a sense of business purpose, beyond simply being profitable, really drive results and add long-term value? Many leading entrepreneurs think so
The world is full of inspiring business leaders, and EY Entrepreneur Of The Year celebrates their achievements and shares key leadership insights. 2016 marks the 30th anniversary of the awards program in the US, and the entrepreneurs honored have consistently driven innovation in their fields.
Beyond contributing a projected USD$1 trillion in revenue and employing more than 14 million people in 2015 alone, these award-winning entrepreneurs have also developed robust approaches to the most vexing challenges facing 21st century business. This series looks at their approaches to risk, growth, talent and purpose in their efforts to build great, enduring companies.
Companies that operate with a clear and driving sense of purpose outperformed the S&P 500 by a factor of 10 between 1996 and 2011.
Being a purpose-led business
If you want to succeed in business, what should your motivation be? To become wealthy and famous? Not so, according to the latest research on some of the world’s most successful entrepreneurs.
Research by EY – and reported upon by Harvard Business Review Analytic Services – has found that companies that operate with a clear and driving sense of purpose, beyond the goal of just making money, outperformed the S&P 500 by a factor of 10 between 1996 and 2011. Developing a cohering purpose, such as community growth, poverty reduction or environmental friendliness at the core of business strategy influences decision-making, inspires employees and customers, and builds trust – an increasingly essential ingredient.
Many great entrepreneurs are very aware of this, and EY asked some of the most innovative entrepreneurs how a sense of purpose helped their organizations. Daniel Lubetzky, Founder and CEO of KIND Healthy Snacks and 2013 award winner, says “an entrepreneur spots an opportunity to create value in society, and then acts on that opportunity.”
The power of purpose
Since the financial crisis, trust in big business has been on the decline. But it needn’t be this way. A business with a strong sense of purpose can engage positively with all stakeholders – be they shareholders, investors and customers, or local communities and economies.
“If you don’t have a broader purpose, you are going to have trouble attracting and keeping employers and customers,” says Steve Case, who won the Entrepreneur Of The Year Award in 1994 as a co-founder of AOL, and went on to found venture capital firm Revolution.
Operating a business with a strong sense of purpose should not only bring about change in the wider world, but also bring on board more trade and better talent. It should also highly motivate existing workforces, who will be prepared to go the extra mile because they know they are not just working for the shareholders’ bottom line, but for something bigger than both themselves and the company.
How to be more purposeful
It takes more to be a purposeful business than just creating a mission statement and putting a few motivational quotes around the office.
Building that sense of purpose into the company from the top down requires a continued demonstration of the connection between that purpose and the company’s business model. Such a strategy needs metrics; but quantifying how well an organization is adhering to a sense of purpose can be a slippery task. Employees can be surveyed with questions that ask how well the company purpose is resonating with and motivating them. Companies can also look to their hiring and retention numbers – two metrics that often show that purpose-driven companies outperform their less purpose-driven rivals.
There are also financial decisions that companies can take to further instill a sense of purpose in an organization. For example, rather than take early-stage venture investment (and the potentially intrusive investor oversight that would come with it), Steve Tanger, founder of Tanger Factory Outlets and 1993 award winner, phoned bank after bank to fund his retail chain with loans rather than venture capital, allowing him to maintain control over the company’s direction and sense of purpose.
Taking pride in purpose
But besides performance objectives, there can also be a sense of pride in following your principles. Online retailer zulily sells collections of clothing, home décor, toys and gifts. The team prides itself on pursuing standards they would be happy presenting to their own mothers. The depth to which this philosophy had become ingrained in this company was demonstrated when CEO Darrell Cavens went undercover on the production line, and packed a basket poorly. “Would you send something like that to your mother?” the employee snapped.
A company like zulily clearly has an example to set when bringing its purpose to its employees. Getting to that position needs strategy, which is why Ben & Jerry’s created a mission department to make sure their social objectives were being properly pursued throughout the company.
Making purpose real
Ultimately, to deliver on its purpose, an organization needs to take care to repeatedly reinforce its purpose at every level of the company, not just in the boardroom. That way not only will a sense of purpose be understood and shared by the team, but also it can also provide a focus to outperform commercial targets.
For the first time in the program’s 30-year history, EY analysts quantified the combined accomplishments of these 9,200 visionary men and women and joined forces with Harvard Business Review Analytic Services to interview many of the winners and capture the findings.