Purpose and performance: an opportunity for business success

At the beginning of the year, 21% of UK CEOs and 45% of global CEOs said their business might not be economically viable in 10 years’ time. PwC found that confidence in business growth was low, with leaders struggling with uncertainty and economic challenges.

That shocking lack of faith in organisational longevity can be addressed by companies that develop purpose statements to drive strategic and operational clarity. Creating future-proof, resilient businesses that people want to work for and customers want to buy from, CEOs need to embrace the power of purpose.

But, those purpose statements must be developed so that they can guide people in their decision-making and act as a means of connecting the business with the world.

“It’s about unlocking who you are and the impact you want to make,” says Joanne Kerr, head of purpose at business consultancy Brandpie. Purpose allows companies to act as problem solvers beyond themselves.  It’s not about purpose or profit – it’s about doing well whilst considering the world you want to live in.

“Five years ago, purpose was an output. Companies had a purpose and they put it on a wall. Now, we’re talking about purpose as an input to strategy and daily decision-making. And ultimately about operationalising that purpose throughout the whole organisation,” Kerr says. “Purpose gives employees a greater motivation to work than the base pursuit of shareholder value. But that emotional connection – that intangible –  could be the thing that drives greater return on assets and equity.”

Brandpie’s recent Purpose Matters report examined purpose in the FTSE 350. It found that purpose statements are most effective when they elucidate a connection between what the business does and the problems they are trying to solve in the wider world. Beyond a myopic focus on shareholder value, companies that lift their heads to the horizon and ask themselves what their role is in the world will ensure not just shareholder value but also long-term growth.

The report proves a clear link between purpose and performance. Companies with defined, strategic and impactful purpose statements are more financially resilient and see a greater return on their assets, a greater return on equity and better ESG metrics than those without purpose statements.

However, to achieve this fiscal benefit, companies need to operationalise their purposes. Professor Nick Barter is co-author of the research and the strategy book; Future Normal: 8 Questions to Create Businesses your Children will be Proud Of. He says: “Companies with a purpose statement have clearer stories about who and what they are. That translates into operational effectiveness. How do you get it to work in every facet of the organisation and externally for the business to capitalise?”

Operationalising corporate purpose will facilitate alignment and easier business decision-making believes Barter. “The philosophy of the organisation is its purpose, vision, mission and values. That leads to great outcomes in terms of numbers because people know what they’re doing, why they are doing it and where the organisation is trying to head to” he adds.

Kerr agrees: “The magic really happens when you find that connection. It unleashes a load of innovation and new thinking.” She advises companies considering their purpose to think about what the world needs, what they are passionate about and ultimately where they can drive value. Shaping a purpose around those concepts can unite the business and create the sparks needed to embed the purpose throughout the organisation.

Brandpie found in its annual CEO survey that while 89% of CEOs said their organisation had a purpose, they were struggling to make it actionable and relevant throughout the business. Barter says organisational culture is “an amorphous thing”, but a company’s vision, mission, values and purpose helps people understand their role and take action to achieve more on the business’s behalf.

It seems simple. Craft a strong purpose. Connect that purpose to the organisational culture. Build in a sense of the company’s role within the world and how it is seeking to improve it in the future.

It may be simple conceptually, but it’s not easy in actuality. For many CEOs, profit is the priority. “Every CEO is chasing a high-performing organisation that produces great outcomes,” Barter says. That is getting harder in today’s uncertain economic landscape. By reframing the conversation around purpose, leaders can shift it from being an added burden, or a nice-to-have, and create real, actionable value from their purpose. If only it is developed in the right way.

Brandpie’s research indicates that purpose statements should be concise. The FTSE 350 average is 16 words. Those with purpose statements below that number outperformed those with longer statements.

The report says: “Showing customers, employees and investors that the organisation is about more than narrow self-interest will drive long-term value.” Shorter statements, a focus on the future and a connection between the outside world and the company’s aims all lead to a stronger financial performance. Purpose is profitable. 

“People believe in powerful purpose statements that actually provide something bigger than themselves,” says Barter. Purpose is part of the story an organisation tells about itself. It’s the company’s opportunity to shape thinking and drive the outcomes it wants to achieve. If it suits the business’ culture, meets the needs of stakeholders and delivers a broad, resilient view of the future, it can be the foundation for a promising future.

Find out more about purpose and productivity with Brandpie

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