Purpose-led transformation

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  • Purpose-led transformation: a strategy for growth

    A company’s purpose is broader than its mission statement, brand, products or financial performance – it articulates the company’s inherent reason for being and its ultimate ambition for sustainable success.

    Successful organizations today have articulated and activated a unique purpose that gives focus and meaning to everything they do. They ensure that this purpose is understood and embraced by all stakeholders – employees, customers, suppliers and investors alike.

    Purposeful companies outperform their competition

    EY - Purposeful companies outperform their competition

    A strong purpose sets an organization apart from its competitors, and the CFO has a role. [See a transcript of this video]  

    Leading CFOs understand that purpose-led organizations outperform their competitors. CFOs are integral to the team that drives their company’s transformation strategy and supporting programs. They are critical to ensuring that decision-making across the whole organization is aligned with purpose.

    The finance chief also translates the purpose into financial and commercial targets and outcomes. For these organizations, purpose is more than having the largest market share or achieving a particular financial result. Their purpose inspires and motivates people to act.

    There is growing momentum behind purpose-led organizations, and conversations are taking place within and between businesses at all levels, including at the World Economic Forum in Davos, Switzerland.

    Purpose-led transformation drives performance and growth. By uniting people behind a common goal it creates new opportunities – to improve efficiency, identify new markets and enhance customer service. Purpose can be harnessed to motivate people throughout the organization, and the CFO has a core role in driving this transformation.

  • What is driving the discussion about purpose now?

    Why purpose-led transformations are becoming more common?

    EY - Why purpose-led transformations are becoming more common?

    Evolving societal expectations and competitive risks are driving companies to rethink their purpose. [See a transcript of this video]  

    Stakeholder expectations are changing. Employees, customers and investors are increasingly looking for deeper reasons to engage with companies. A genuine purpose articulates the organization’s vision of how it intends to operate sustainably as a successful company within a complex and borderless society. It often – though not always – includes social, humanitarian and environmental dimensions.

    The strongest purposes are a significant competitive advantage.

    Imagine a plumbing company striving to improve the world’s sanitation to help combat waste-based diseases. Within their portfolio of plumbing products, they have created low-cost, hygienic products for the developing world that augment their high-end product line. All stakeholders can connect to the purpose, from employees making the product, customers buying the product and investors supporting the business.  The purpose allows stakeholders to genuinely buy in to the vision and feel part of the success.

    The discussion about the power of purpose is also being fueled by advances in technology which allow easy access to information about companies’ behavior and performance.  In the past, companies primarily were judged against the quality of their products and services and their finances. Now, they are being assessed against a far broader set of criteria, which includes purposefulness.

    Organizations now have an opportunity to demonstrate how their behavior supports and furthers their purpose, allowing them to build reputation and associated financial growth.

    What are the benefits of purpose?

    A strong purpose helps grow the business and differentiate from competitors. It also provides a “North Star” to guide the company, to help it hold strong during the peaks and troughs of economic volatility. This adherence to the purpose helps in formulating future-focused approaches and move fence-sitting decisions.

    Research shows that organizations with a clear purpose – one embraced by leadership/ownership, management, employees, vendors, customers and the market alike – outperform competitors.

    • They hire and retain the best employees. A 2013 study shows that employees are three times more likely to stay with the organization.1
    • They attract, satisfy and engage customers. Eighty-nine percent of clients believe a purpose-driven company will deliver the highest quality products and services.2
    • They achieve higher returns for shareholders. Between 1996 and 2011, purpose-led companies outperformed the S&P 500 by 10 times.3
  • What triggers purpose-led transformation?

    Companies that have undergone structural changes such as mergers and acquisitions will benefit from purpose-led transformation. They can capitalize on this event as an opportunity to retell or re-craft their new company purpose.

    Newly formed entities are also in an ideal position to define their galvanizing force, portray this purpose to the market, customers and employees, and move forward as one organization. Without a focus on purpose, newly formed entities can dilute the company’s brand and employee engagement, loyalty and retention. It can also impact investors’ view of the organization and market value.

    Organizations often have hundreds of change programs running simultaneously. The success of these programs is notoriously low: one out of ten succeeds, representing a massive cost with little benefit. The main reason for this high failure rate is that people only change their behavior when they understand and believe in the reason why they are being asked to do so. Change for the sake of financial benefit – even for them personally – is less likely to motivate the masses than change for the sake of betterment.

    Many industries, such as life sciences, have already started on their purpose-led transformation journey. In recent years, players in these sectors have shifted their focus from doctors to patients, who are taking greater control of their own health in all markets across the globe.

    Life sciences companies that do not adopt this patient-centric approach will not be able to compete with those that are beginning to deliver patient care that is more personalized and more effective.

    A purpose-led transformation embeds the purpose across every aspect of the organization and provides a framework for ongoing decision-making. This includes:

    • Ensuring the employee experience mirrors the brand’s promise
    • Aligning procurement, practices and policies
    • Defining HR processes, including training, recruitment and retention
    • Ensuring the business and product portfolios are consistent with the company’s purpose
    • Aligning compensation and rewards with a mix of criteria that support the purpose

    Business process, system and policy changes all have more substance and meaning when they are executed with an eye to a broader purpose.

  • The CFO’s role in purpose-led transformation

    The CFO is the executive who can translate the purpose into the financial and commercial drivers that will influence the organization’s day-to-day behavior internally, and resonate with the customers externally. This means establishing KPIs that reflect financial and non-financial criteria, and managing market communications.

    To help achieve the projected ROI of any major change program, the CFO should insist at the outset that the alignment of the program parallels the organizational purpose. Company leadership – and specifically the CFO – should ensure that all KPIs, communications and incentives consistently reinforce the reason for the change, and its benefits. This applies not only to the company or the individual, but also the broader set of criteria encompassed within the organization’s purpose. 

    The CFO should also remain involved throughout major transformation initiatives. By providing input on decisions to prioritize money, time and other resources, the CFO can reinforce and support the broader organization purpose.

    The CFO plays a pivotal role in a successful purpose-led transformation through:

    • Supporting the strategic planning process and discussing the underlying purpose with the C-suite
    • Translating strategy into measurable financial, commercial and investor outcomes
    • Examining all investment decisions through the lens of “purpose” to help prioritize the allocation of critical and scarce resources
    • Providing the framework for investing in resources and people
    • Defining the business case supporting the transformation and establishing “purpose” metrics to evaluate the ROI
    • Balancing organizational purpose with short-term performance

    To avoid being left behind by purpose-led competitors, senior executives in all industries should be thinking about how well understood and embedded their organization’s ultimate purpose is in the company’s fabric.  The CFO’s role in supporting and realizing the significant opportunities that align with this process is vital.

  • Life sciences: a patient-centric approach to purpose

    The life sciences industry as a whole is undergoing a purpose-led transformation. Players in this sector have shifted their focus from doctors to patients, who are taking greater control of their own health in all markets across the globe.

    Leading by example

    EY - Purpose-led transformation: Leading by example

    A perspective from the Life Sciences sector. [See a transcript of this video]  

    Life sciences organizations are good examples of what it means to rally around a common purpose. Purpose is infused in the DNA of these organizations, from the researchers who are developing the products, to their financial and commercial organizations. The business units are united under one motto: better patient outcomes.

    Thanks to the internet, social media, electronic records and personal wireless devices, patients have greater access to information about their health. Technology is enabling life sciences companies to personalize treatment and focus more on prevention, such as Bluetooth connectivity that allows doctors and patients to monitor symptoms on their smart phones.

    CFOs in this sector need to ensure that decisions made throughout the product development life cycle align with the purpose. And, given the amount of M&A activity in the industry, CFOs need to look for organizations that complement their company’s purpose.

    In an effort to shed the moniker “Big Pharma,” these companies are challenging the notion that they are focused on doctors as their target market, and that they are out of touch with the patient. Life sciences companies that do not adopt this patient-centric approach will be unable to compete with those that are beginning to deliver patient care that is more personalized and more effective.

View our latest resources on purpose-led transformation

 

1What Is Your Quality of Life at Work, The Energy Project, 2013.

2The goodpurpose® study, Edleman, 2013.

3Rajendra S. Sisodia; Jagdish N. Sheth; David B. Wolfe, Firms of Endearment: How World-Class Companies Profit from Passion and Purpose, Wharton School Publishing, 2007.