Campbell Macpherson, international business adviser and author of 2018 Business Book of the Year, ‘The Change Catalyst’ explores why clarifying your firm’s purpose is the most important thing you can do to set your business up for future success.
Beyond making money, what is our industry’s reason for being? Why does it exist? Why does it matter?
If you think these are utterly daft questions; I urge you to think again. They are questions that people inside and outside of this industry genuinely want answered, especially if they are under 35 – and they are your current talent, your future talent and your future customers.
This new generation genuinely wants to make a difference. They want to work for an industry that is changing the world; shaping the world for the better. And, increasingly, they are not choosing financial services.
The number of MBA graduates going to financial services has almost halved in the last decade, according to London Business School (from 46% in 2007 to 26% in 2017). No financial services company makes the top 12 in the latest Times 100 Graduate Employers list, and only 8 FS firms feature in the Top 50.
Yes, currently the Tech industry is luring graduates with higher starting salaries but, in the main, this is not only down to money. It is also down to Purpose – or, rather, the perceived lack of it.
But Purpose is not just relevant to the next generation; it is relevant to all of us. Employees who find meaning from their work report twice the job satisfaction, perform better and are three times more likely to stay with their employer (HBR) – no matter what their age. And to give your people meaning at work, they need to understand ‘the why’ – why their work is relevant, why the company matters and to whom.
Companies without a clear Purpose struggle to fulfil their potential. Some fail altogether. Many of the banking failures a decade ago and the corporate failures that adorn our news headlines on a daily basis can be attributed to the fact that the company had lost its way: it had either never had a Purpose beyond financial results, failed to refine its Purpose as the market changed or had allowed its Purpose to morph into one short-lived objective – the enrichment of its executives.
Purpose is that critical.
We have known this simple truth for years, yet for some unfathomable reason, we have often done next to nothing about it. In a recent PwC survey, 79% of leaders agreed that “an organization’s purpose is central to business success”, yet 68% said that purpose was not used in leadership decision making.
In light of that, let’s narrow our vision and ask the most critical question to your future success:
What is your organisations purpose?
Your Purpose is the reason why your company exists – and for whom.
It is the bed rock of your strategy, your values and your culture. It is the reason why your people bounce into work every morning: It guides what they do, how they do it and why. It is the underlying reason why people want to work for you and why clients want to work with you.
Your purpose must be more than “to maximise profit”, “profitable growth”, “shareholder value” or “responsible allocation of capital”. Like “comply with the regulator”, these are all givens. To be honest, they always have been.
But today, the bar is even higher. Your company must also have a social purpose. It must be a ‘responsible capitalist’– acting for the benefit of all stakeholders: employees, suppliers, partners, customers and the wider communities in which they operate – not merely for the benefit of shareholders and executives. Philanthropy (eg having a charitable foundation) is now another ‘given’ – an activity that employees simply expect from every employer. And if it isn’t there – they won’t work for you.
What are your three key truths?
Your Purpose should be built upon three key truths that lie at the heart of your business:
- Your core ethos – the core belief / philosophy that underpins your business.
- What makes you special – your key comparative advantages
- The needs, wants and aspirations of your core customers
What is the core ethos that lies at the heart of your business?
Let me give you a couple of examples:
- The core philosophy that lies at the heart of Wellington, a trillion dollar active fund manager out of Boston, is ‘stewardship’, a profound and increasingly rare leadership practice of leaving the business, or your part of it, in a better shape than you found it.
- PSP investments in Quebec have a different philosophy entirely, built around the belief that short-term performance is all-important. Their CIO once said to me: “There is no such thing as ‘long term’. The ‘long term’ is just a series of ‘short terms’.” Whether you agree with him is irrelevant – the philosophy is genuine and was underpinning the entire business.
What makes you special?
What makes Wellington special is their genuinely collaborative culture. Having observed their global morning investment meeting a few years ago, I was struck with the way that their uber-intelligent analysts interacted with one another – building upon one another’s insight rather than tearing each other apart. So … what is your ‘magic’? What are your key comparative advantages …?
The needs, wants and aspirations of your core customers
When it comes to customers, which ones lie in your ‘sweet spot’? Which segments are most attracted to your products, services, approach and pricing? What do they need today? What do they want today? What do they aspire to have in the future?
Avoid the platypus!
Where many companies come to grief is in the articulation of their Purpose Statement. Setting out to do the right thing, they engage large swathes of their employees in lengthy and messy group word-smithing events. However, this approach almost always results in a ‘platypus of a purpose’ – a strange beast made up of spare parts that looks like it has been designed by committee. Or worse – the end result is a bland and anodyne statement that could apply equally to any of your competitors.
Definitely engage as many of your people as possible, but not in word-smithing; engage them in identifying the three key truths above; those critical elements that will underpin every part of your strategy and culture. Appoint a much smaller group in the actual wording of the statement – and let it be known upfront that the CEO will make the final decision.
Any Purpose Statement that you do come up with must pass the following key tests:
- It must be genuine
- It must be as unique as possible – not a string of words that could also apply to any of your competitors
- It must not elicit the reactions “So what?” and/or “Prove it”.
- It would make customers and employees think: “They get it!”
- It can guide behaviours and decision-making throughout the organisation.
Wellington has the shortest genuine purpose statements I have encountered: ‘Client. Firm. Self.’ This simple mantra guides everything they do and is underpinned by four genuine comparative advantages:
- The long-term perspective of a partnership structure
- An open, collaborative culture
- Empowered investment teams and rigorous proprietary research
- Singular focus on investment management
Their approach passes every single one of the five tests above.
Making it real.
Defining your Purpose is only the end of the beginning. It then needs to be made real. The only way to ensure successful implementation is to:
- Engage key leaders, managers and influencers to identify the implications of the agreed Purpose and the changes required across the company to bring the Purpose to life, and
- Treat the implementation like the change programme it is to make sure the Purpose is actually embedded within everything the company does.
This is where a trusted adviser comes in rather handy …
What is your purpose?
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