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24 November 2022

Beyond profit: How do organizations create purpose?

Beyond profit: How do organizations create purpose?

Purpose is important. But what does it mean? How can organizations create purpose for themselves and for their stakeholders, including employees and customers? Creating value and positive social impact through innovation has gained momentum in the last years: organizations must respond to the call for purpose.

In his inspiring Ted Talk Profit is Not Always The Point, Unilever’s chief operating officer, Harish Manwani, shared a key lesson from his first day at Unilever as a management trainee back in 1976. His boss asked him whether he knew why he was at the company. Manwani replied: “I’m here to sell a lot of soap.” His boss countered: “No, you’re here to change lives”. Yes, his job was to sell soap. But ultimately selling soap will change and save people’s lives. This is meaningful for an employee, a customer, and an organization.

Forty-five years later, the call for purpose is ever growing. Surveys, such as the McKinsey Organizational Purpose, keep showing that purpose is not only important for employees but that it is becoming more important than salary or profit. The recent 2021 Fortune Best Workplaces for Millennials survey  found that employees are more likely than ever to quit their job if payment and purpose do not align. Consumers do also care about purpose-driven companies: two thirds indicated that they would switch from a product they typically buy to an alternative product from a purpose-driven company, according to the Cone/Porter Novelli survey.

Purpose is important. And its importance has even further risen during the Covid-19 pandemic: our ways of working and living have been deeply impacted, and we took the time to reflect on what is important, including our purpose in life and at work.[1]

But what does ‘purpose’ mean? How can organizations, with which most of us spend a significant time as employees or customers, create purpose for themselves and for their stakeholders, including employees and customers?

What is ‘purpose’ and how can organizations create it?
According to the Cambridge Dictionary  ‘purpose’ refers to ‘why you do something’, ‘a determination or a feeling of having a reason for what you do’, and ‘to have a use.’ In other words, purpose is the ‘raison d’être’: it makes sense out of what we are doing. Remember Manwani’s example: selling soap might sound meaningless to some, or just one way to make a living and help a company increase its profit. But it can also be so much more than that! Seeing the purpose in one’s day-to-day tasks changes everything.

What helps us have purpose is working for organizations that have one. The U.S. Business Roundtable  defines the company’s purpose ‘to promote an economy that serves all Americans’, and the recently updated Davos Manifesto 2020  by World Economic Forum founder Klaus Schwab describes it as ‘to engage all its stakeholders in shared and sustained value creation.’ In other words, organizational purpose is more than profit. It is about serving all stakeholders. But what does that look like exactly?

The B Corp movement illustrates how purpose is put into action. The movement started in 2006 with the objective to support a stakeholder-driven model of business and to transform business to a force for good. Standards related to social and environmental performance, accountability, and transparency have hence been developed. Companies can obtain a B Corporation certification when they have successfully shown that their business serves all stakeholders and balance purpose and profit. Today, there are more than 3,300 certified B Corporations across 150 industries in more than 70 countries. Many studies and surveys show how B Corps are attracting employees as well as consumers who search for purpose.

The Dutch start-up Tony’s Chocolonely is a good example of a purpose-driven certified B Corporation. When Dutch journalist Teun van de Keuken ran a documentary on child slave labour in the cocoa industry, he realized that almost none of the chocolate produced at the time was slave-free. Driven by the purpose ‘to make 100% slave-free the norm in chocolate’, he started to produce his own chocolate and set the foundation for Tony’s Chocolonely in 2005. Its success lies in long-term partnerships with suppliers and tracing their cocoa beans throughout the supply chain. It also inspires others to take action and join the purpose. Unsurprisingly, Tony’s Chocolonely is listed as one of the best workplaces in The Great Place To Work , and is amongst the largest local players in the Dutch chocolate market.[2]

Learning to work with purpose
Cross-sector partnerships are key to address the UN Sustainable Development Goals effectively, which can provide a framework for working with purpose effectively. Recent research outputs published by the Competence Center for Innovation and Partnerships provide insights on how organizations can develop responsible innovation and what organizational capabilities can support organizations in engaging in responsible innovation and thereby have a positive impact on society. Besides, research is being conducted by the Geneva Center for Corporate Governance  to explore and examine how organizations can organize and govern themselves to serve all stakeholders responsibly.

Organizational responsibility and sustainability are also key strengths of the Geneva School of Economics and Management (GSEM). Its faculty members are engaged in a variety of research projects to provide insights on the creation of organizational purpose, its management, and impact. For example, Professor Markus Menz has been examining how corporate governance can include the consideration of all stakeholders. Professor Thomas Fischer has been investigating the traits of ethical leadership, while I have been studying the expanding responsibilities of business for human rights along their supply chain. In addition to research-related activities, organizational responsibility, sustainability, and purpose are taught in our classrooms. The innovative curriculum of the Executive MBA emphasizes the personal and professional development of its participants. During their studies, they learn how to manage with emotional intelligence and to train group resilience, acquire cross-cultural management and leadership skills, and practice how to successfully work in teams and foster engagement.

Leading responsibly is not a ‘nice to have’ anymore, but fundamental to all business professionals who aim to lead with greater confidence, inspire purpose and performance at all levels, and contribute to an organization of responsibility and integrity.

This article has first been published in the NewSpecial Magazine (2022 March edition).


By Judith Schrempf-Stirling

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