Purpose has become a popular discussion point in HR circles as of late, and for good reason – a well-defined and compelling purpose can bring about long-lasting, positive change to your organisation and the people who engage with it.
In its simplest form, purpose is about identifying the core reason why your organisation exists – why you do what you do - then finding an effective way of articulating and demonstrating that message to the world.
But unlike social responsibility, which in most cases is about ticking a few boxes and then carrying on with business as usual, an organisation’s purpose is multifaceted. It incorporates and builds from all aspects of your organisation, from corporate elements such as strategy and structure, through to personal factors such as individual fulfilment and employee development.
And while purpose comes with a number of enticing benefits, both from a corporate and personal perspective, here are some of the more compelling business benefits that can come alongside embedding a purpose:
Loyal and long-lasting customers.
At a time when customer review sites such as Yelp and TripAdvisor have become commonplace, people have access to more information about your organisation than ever before – whether it be positive or negative.
Customers are far more likely to prefer organisations that have similar views or beliefs as their own, particularly younger consumers. According to the University of Southern California, 87% of millennials base their buying decisions on the positive social efforts of a company.
Another study by Gallup revealed that customers who are aligned with a brand promise give that brand twice as much share of their wallet (47%) as customers who aren't aligned with that same brand (23%).
To form a genuine connection with customers, organisations that can clearly define and express their purpose in a meaningful way will have the upper hand. Interestingly, 87% of customers said they want to establish a “meaningful relationship” with brands, according to Edelman’s Brandshare report, meaning the opportunity to form long-lasting customer relationships is ripe for the taking.
But actions speak louder than words. Organisations also need to demonstrate how they are making a difference in a meaningful way. For instance, Starbucks’ purpose is “to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.” The coffee company backs up this statement by donating all unsold food in its US stores to food banks – a practical, emotional and relevant way to make a difference.
Attract and retain passionate people.
When people look for a new job, a number of factors come into the equation; work-life balance, salary and benefits, diversity, to name just a few. But a recent LinkedIn survey of 26,000 respondents revealed purpose is the number one factor people look at during their job search.
And employees who are more aligned with their company's identity perform higher on key business performance metrics than employees who are less aligned, according to Gallup.
Purpose is also useful for retaining key talent. When the purpose of an organisation and its employees are aligned, employee satisfaction is significantly higher – that’s according to 89% of business executives interviewed by EY.
And these employees are also more likely to stick around for longer. Research from Deloitte found that the average millennial tenure at a company sits at two years, but that figure jumps to five when there is alignment with purpose.
One way to retain talent is by helping employees understand their own personal purpose, and then determining how their purpose fits within the organisation as a whole. Unilever has incorporated purpose and social good into its employees’ performance reviews. For example, they measure their employees’ impact on people and the planet as well as their financial performance.
Greater business performance.
With the support of loyal customers and engaged employees, it should come as no surprise that purpose-driven organisations are far more likely to outperform the competition.
In Corporate Culture and Performance, authors John Kotter and James Heskett measured stock prices over a decade-long period and found purposeful companies outperform their counterparts by a factor of 12.
And in another study, organisations that were dubbed best in class at embedding and exploiting purpose experienced promising results: 64% saw 10%-30% revenue growth over three years, 81% received top scores in customer satisfaction, and 67% were awarded top scores in employee satisfaction.
The majority of business leaders recognise the competitive advantage of purpose – a recent study by PwC found 79% of business leaders agreed that purpose is central to a business’s success.
So, as we can see, organisations with a purpose clearly have a competitive edge, but creating and embedding an organisational purpose can be an extremely complex process.