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Deep Purpose: The Heart and Soul of High-Performance Companies

Ranjay Gulati, Contributor


HBS Professor Ranjay Gulati provides a sneak peak into his new book about the revolutionary impact deep purpose can have on company performance.

  1. Why did you decide to write this book—and why is its message so important right now?

Efforts to tackle pressing problems such as climate change and inequality have stalled, leaving society at a crossroads. In this context, advocates of corporate purpose have lauded it as a silver bullet, while cynics regard it as a cloak behind which companies can hide their true selfish intentions. In reality, some companies have indeed used the idea of “purpose” to mask nefarious conduct. Others, however, have pursued purpose in more authentic ways. By assessing companies that truly embrace purpose as an organizing principle, I hope to showcase how the vast majority of businesses today might better employ purpose to serve society while also achieving economic success.  

  1. What is purpose, really?

Psychologist William Damon has described purpose as “a stable and generalized intention to accomplish something that is at the same time meaningful to the self and consequential for the world beyond the self.”  It’s not just individuals who harbor intent—scholars have applied this notion to businesses as well. In the deep purpose companies I studied, I found that leaders tended to regard purpose not simply as a tool to be used, but as an expression of heartfelt intent. Purpose was deeply meaningful, a unifying statement of the commercial and social problems that leaders wanted to profitably solve for all stakeholders.

A typical purpose encompasses 3 elements: 

(1) ambitious (“goals”)

(2) has an idealistic cast (“duties”)

(3) envisions the creation of long-term value. 

  1. You suggest that the term “purpose” has been hijacked over the years. Why do you think that is, and why should we be thinking differently about it now?

In our increasingly polarized environment, extremist notions of purpose tend to prevail. On the one hand, some continue to believe that the purpose of business is to serve shareholders, since it is they who put their capital at risk. Government, these individuals argue, should handle social issues. On the other hand, others believe that the purpose of business is anything but profit—or at the very least, that profit should be a low priority. Observers and practitioners seeking a middle ground regard all social actors as “stakeholders” and then struggle to discern who ranks first among equals. As the companies I studied show, business leaders can serve the interests of multiple stakeholders, but they must think long-term and look beyond the win-win options that, while alluring, also often prove elusive.

  1. How can purpose transform business?

As Jørgen Vig Knudstorp, Former CEO of LEGO told me, “If you want to transform—not just turn around—a company you need to find the essence of the brand, your unique identity…finding that identity is just like finding out your purpose in life.”  Similarly, Satya Nadella, the CEO of Microsoft, described the role of purpose in his transformation of Microsoft as follows: “We must rediscover our soul—our unique core…We must all understand and embrace what only Microsoft can contribute to the world and how we can once again change the world… In our context, technologies will come and go. Strategies will come and go. But how you invent and anchor yourself—you need this strap [holding you in place] which is a sense of purpose.”  The deep purpose companies I studied understood the transformational potential of purpose, and they perceived it as akin to changing the organization’s operating system. Such foundational changes don’t come easily, and they take considerable time and effort. But as these cases and others show, it is very much worth the effort!

  1. You use the term “purpose washing” in the book to discuss companies—like Theranos and Facebook—who utilize purpose superficially to make themselves look good to society. Why is it time to go deep on purpose?

For many companies like Purdue Pharma, Theranos, and Facebook, purpose is or was a platform for “virtue signaling”—trying to convey you have good intentions but actually hiding self-serving behavior behind the scenes. Such double-dealing has given organizational purpose a bad rap. This is unfortunate, as it discourages leaders who might be genuinely interested in exploring and utilizing deep purpose.   

  1. You write that in our polarized times, moral neutrality is no longer an option. Can you explain?

Increasingly, members of the public expect businesses and individual leaders to take a position on politically sensitive issues. Standing on the sidelines is no longer an acceptable option. As I found, purpose-driven leaders had an easier time speaking up because stakeholders already expected that these firms would behave in ways compatible with their purpose—leaders were grounding every decision they made with deep purpose.  While you may draw greater scrutiny when you publicly state a purpose, it also gives you a framework within which you want to operate and not get pulled beyond it. As Thomas Andersen, the former CEO of Orsted, a green energy firm in Europe, explained to me, “Purpose gives you a license on what you can demand from your stakeholders.” 

  1. We’ve heard a lot about “win wins” or “conscious capitalism” but you say that “practical idealism” is superior to that. Why?

I make an important distinction between “shallow” and “deep” purpose. Shallow purpose comes in three distinct flavors. The first is “purpose in disguise”—companies that use purpose as a cloak to hide bad intentions. The second is “purpose on the periphery”—companies that treat purpose as CSR or a form of charity work that they do on the side while continuing to run their core business as a shareholder value maximizing, economic engine. The third is “purpose as exclusively win-win”—those who embrace the notion of “win-win,” committing to embracing socially oriented projects as long as they are economically viable as well.  A number of prior researchers have talked about the pursuit of win-win as synonymous with purpose-driven enterprises. My research shows that this paints purpose-driven companies as operating in a very narrow space in which no tradeoffs occur. I found that deep purpose companies operate in a larger space where tradeoffs are widespread. Instead of shying away from tradeoffs, they lean into them. Of course they look for novel win-win solutions that bypass tradeoffs, but even when those options aren’t visible, they are still willing to take action and make calculated and tough tradeoffs. I call this “practical idealism” because these firms are at once practical about making difficult choices, but they also keep their eye firmly fixed on an ideal way of being.

  1. You talk about how purpose can actually help to boost company performance. How?

A key insight in my book is that purpose is not a tax on business. Rather it is a generative force that allows the enterprise to simultaneously perform better on its commercial and social objectives. But purpose only becomes generative when companies pursue it deeply and view it as something very fundamental to their being. In that case, the organization becomes transformed from one in which employees and other stakeholders connect with it in a transactional way into one in which they feel personally committed to the organization and its objectives. A number of studies have suggested a correlation between purpose and long-term performance (as measured by total shareholder return, growth, and achievement of measurable social objectives). But few have tried to pin down the specific levers by which this performance materializes. My in-depth fieldwork allowed me to identify the specific levers by which the pursuit of deep purpose translates into superior financial and social performance.

  1. How does purpose create trust, autonomy and collaboration?

As Satya Nadella told me, “Writing a purpose statement is easy, what comes next is much harder.” The bulk of my book is devoted to exploring how deep purpose companies make purpose an integral part of their organization. I looked carefully at how such firms modify their organizational architecture to allow themselves to operate with purpose. I found that deep purpose companies are extremely attentive to their culture and bring it into close alignment with their purpose. Culture is the translation of purpose into a set of behavioral anchors and principles by which the firm operates. There are some common themes in the cultures of deep purpose companies. First, they encourage individuals to discover and live their personal purposes. They also provide guidance and support that helps individuals connect their personal purpose with that of the organization.  Second, instead of attempting to shackle or control behavior, these cultures tend to encourage autonomy and individual expression. Together, these shifts help transform the connection between employees and the organization into one of trust and commitment rather than transactions and contracts.

10.   In the book you discuss the idea of “purpose drift.” What is it, and how can leaders avoid it?

As part of this research I looked at some iconic and decades-old deep purpose companies, detailing how some of them faced a progressive decay in their lived purpose over time. Some, such as Johnson & Johnson and Boeing, only recognized this decay once a crisis had already materialized. Others took proactive action to ensure that their purpose stayed deep across time. Looking across several such cases, I document some of the key factors that lead to this decay, such as the departure of a founder, while also examining how firms sustain their purpose-orientation.  

  1. How can we measure purpose and the effectiveness of our purpose driven work?

Measuring progress in embracing purpose remains one of the most thorny issues for deep purpose companies. It’s easy to measure outputs of an organization, but how does one measure intentions? To examine this issue, I looked at a number of organizations, including Ernst & Young. I documented the objective and subjective measures such organizations put into place to track their progress in becoming and staying deep purpose organizations.

  1. What are the skills leaders need to develop in order to lead purposefully?

Leaders must function as both “plumbers” and “poets.” Plumbers assess market conditions, set strategies, and focus on outstanding execution. Poets inspire people around a shared purpose. If you lack a purpose, you must first find one, plumbing the depths of your heritage for inspiration. Then you must disseminate it, in part by crafting a big story about who you are, what your firm is about, and what it is there to do. Beyond story-telling you must ensure that all of your corporate systems, structures, and processes align with your purpose. And ultimately, you must embody the purpose. Your actions and words must mirror and echo your organizational purpose. In many ways, leaders expect more of themselves when they purport to lead deep purpose organizations.

  1. What is your prediction for the future of capitalism?

I remain hopeful that capitalism will continue to serve as a dynamic economic system, one that will become more inclusive and embrace other social issues while continuing to generate prosperity. The last several years served as a wakeup call for many CEOs, prompting them to take public positions on social and civic issues. At the same time, the pressure to perform is not going away and indeed will continue to intensify. The business community will continue to redefine business performance to encompass not only shareholder return but the company’s impact on employees, customers, community, and the planet. As leaders begin to pursue this broader notion of performance, they will have to learn to make hard tradeoffs and become more transparent about them. Hiding behind the idea of “purpose” or behind dressed-up ESG scores is no longer an option. Organizations that don’t get serious about  purpose risk public censure and a quick demise.

  1. What advice would you give young leaders just starting out?

The rising generation of young leaders is more purposeful in their lives than prior generations and cares deeply not just about the bottom line, but fulfilling an organizational purpose.  A range of fast-growth startups operating today didn’t launch with big ideas only, but also with big ideals. As I’ve written in a recent HBR, “Startups typically operate with the mentality that growth and profit come first, higher calling comes second. This strategy, however, is misguided. Increasingly, entrepreneurs are imbuing their ventures with a grand ideal in addition to a great idea. This ideal not only serves as a moral purpose, but also has three strategic and operational advantages. First, it can help expand entrepreneurial ambition. Second, it can attract fellow travelers. And third, it can help align a winning team.”  

 And if you are not necessarily part of a start-up and early in your career, think hard about your own life purpose and use it as a filter to make important life decisions including where you might want to work. You will find that you perform best in purposeful organizations where its purpose is resonant with your own purpose.

To learn more about Deep Purpose, see deeppurpose.net. Professor Gulati’s next exciting project is an upcoming speaker series titled What They’re Made Of: Secrets and Stories of Leaders on the Edge. Through the series, Professor Gulati will interview CEO’s from around the world to understand how they operate amidst unprecedented instability. Included in the series are the following: Roz Brewer, CEO of Walgreens; Alan Jope, CEO of Unilever; Sim Tshabala, CEO of Standard Bank, the largest pan-african bank; and Mona Ataya, CEO of Mumzworld, the largest online mother’s accessories and baby toys seller in the middle east. Alumni and current students are welcome to attend. For more information on the series and additional speakers, please visit the website.

 

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Ranjay Gulati is a professor at Harvard Business School and an expert on leadership, strategy and organizational growth. Until recently, he chaired the Advanced Management Program, the school’s flagship senior leader executive program. He has authored seven books, including “Deep Purpose: The Heart and Soul of High-Performance Companies,” which will appear in February 2022.


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