Beyond Profit

Linking Purpose & Profit for Competitive Edge

“I think if the people who work for a business are proud of the business they work for, they’ll work that much harder, and therefore, I think turning your business into a real force for good is good business sense as well.” Sir Richard Branson

Most board and executive perspectives still separate profit and Purpose as two diametrical opposites. Whilst vision statements and value systems are crafted, these fall short when faced with economic decisions vs. what would be the right thing to do. The arguments for not linking the two more closely range from good intent but economic fear (“We can’t afford to charge our customers more for building more schools in Namibia”) to outright ignorance (“We are here to make money, nothing more, nothing less”).

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Purpose & Profit are not opposites; The Guiding Purpose Strategy, page 36

The evidence available to underpin that Purpose and profit can be linked is astounding. Employees are three times more likely to stay at Purpose-driven companies. In addition, the workforce is 1.4 times more engaged and 1.7 times more satisfied at Purpose-driven companies. In times of decreasing relevancy at both individual and organizational levels, disruptive forces are challenging organizations to reassess how value is created and how people (especially younger generations) fit into an evolved worldview. A study by PwC found that millennials who have a strong connection to the Purpose of their organization are 5.3 times more likely to stay. Thus, putting Purpose at the core of a corporation’s thinking offers a collective way to close the growing gap between competitive edge and meaningful work.

Business models properly centered on Purpose build beneficial relationships with external stakeholders and drive culture from within. Successful and future-oriented businesses are increasingly seeing Purpose transformation as a powerful differentiator grounded in humanity, building trust, increasing loyalty and inspiring action. Moreover, it is a means for talent attraction and gaining consumer trust. Some 89% of consumers believe Purpose-driven companies will deliver better quality services and 72% would recommend products and services delivered by companies with clarity of Purpose to their friends.

Being an activator of growth and a driver of profits, companies that operate with a clear and driving sense of Purpose outperform the S&P 500 by a factor of 10.37 In their research Millward Brown and Jim Stengel developed a list of the worlds’ 50 fastest growing brands out of 50,000 brands across 30+ countries (including both business to business (B2B) and business to consumer (B2C) businesses in 28 categories), which built the deepest relationships with customers and achieved the greatest financial growth. They found that investment in the companies that are able to serve a higher Purpose – the Stengel 50 – over a ten-year period would have been 400% more profitable than an investment in the S&P 500. Brands who center their businesses on ideals or a higher Purpose have a growth rate triple that of competitors in their categories. Kantar’s Purpose 2020 study finds similar links: Purpose-driven brands grow twice as fast as their competition.

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The Guiding Purpose Strategy, page 38

A strong set of arguments won’t unite people, but a strong philosophy will. A rational model may be able to connect individuals, but a deeply rooted Purpose model is able to go beyond and offer a catalyst for a true cultural shift. As a cultural reference, Ron Howard, director of a film about John Nash’s endeavor called A Beautiful Mind, interpreted Nash’s model in a scene showing his eureka moment. Nash in the movie expressed his discovery as follows:

“Adam Smith said that the best result comes from everyone in the group doing what is best for himself, right? That’s what he said. Incomplete. Because the best result would come from everyone in the group doing what is best for himself AND the group.”

Organizational culture can only be cultivated and maintained if all stakeholders acknowledge the fact that the best results come from everyone in the group doing what is best for themselves AND the group. Research by IMD and Burson Cohn Wolfe provides “strong evidence that leadership is a strong and consistent predictor of authentic corporate Purpose, explaining almost 50% of the variance in perceptions of authenticity.”

Purpose and profit are not opposites. Rather, the convergence of the two can help companies build long-term, sustainable ways to create competitive advantage. This is even more important in times when the concept of a unique selling proposition is increasingly a model of the past and when consumers and employees look for more than money in what they buy and do. The video above is borrowed from Schroders and captures the dichotomy of Purpose and Profit beautifully. It's great to see genuine actors within the Financial Services industry pulling in their weight through the lever of money, though much remains to be done as our upcoming Hirschel and Kramer (H&K) 2023 Responsible Investment Brand Index (RIBI™) will demonstrate.

The world needs to see more industries and organizations genuinely adopt Purpose-driven leadership as part of their long-term thinking. It is for the good of companies, brands and their people. And whilst Purpose transformation needs to remain first and foremost an economic model for companies to build their future on, it is also a viable model that contributes to the good of our planet and the generations to come.

Please get in touch for more in-depth reflections, case-in-points, further thinking on the topic or the full chapter excerpt from the book.

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Excerpt from The Guiding Purpose Strategy, A Navigational Code for Growth, Extended Edition, Markus Kramer 202, Clink Street Publishing, London/New York. Sources in this article are from: The Energy Project and Harvard Business Review, PwC Purpose Study, 2018, Edelman 2012 ‘Good Purpose Study’, EY Beacon Institute 1996-2011 Purpose Study, Kantar Purpose 2020 Study, Rethinking Prestige Branding by W. Schaefer & JP Kuehlwein, Patagonia, 2018, Burson Marsteller Power of Purpose study, 20215

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