3 steps closer to a purposeful organisation

Most executives realise that, to motivate employees and improve productivity, they cannot rely on financial incentives alone. People need to understand the higher purpose of their jobs.

Respondents in a global survey of senior executives by Harvard Business Reviewand EY’s Beacon Institute agreed on the importance of purpose: 89% said a strong sense of collective purpose drives employee satisfaction; 84% said it can affect an organisation’s ability to transform itself; and 80% agreed that purpose helps increase customer loyalty.

One company we know well took this to heart. During a weekly meeting, senior executives started to explain how their pharmaceutical products not only attracted profits but also significantly improved patient outcomes. One senior manager introduced a patient who explained how one of the company’s drugs had saved her life.

After the meeting, the staff’s responses were not what management had hoped for. Many were cynical and some were angry. One employee said: “[He] drags a patient in … trying to exploit our emotions to make us work harder? That’s pretty low.” The senior executive’s well-intended efforts had clearly backfired.

In our experience, this company is not alone. Where most organisations realise the relevance of purpose, very few seem to get it right in practice.

In our survey, only 38% of leaders said their staff had a clear understanding of organisational purpose. Another study showed that more than 87% of America’s workforce felt they were unable to contribute to their full potential because they don’t have passion for their work.

According to US and global Gallup polls, about 70% of employees felt disengaged and not “involved in, enthusiastic about, or committed to their work”; 17% of that group were “actively disengaged” and felt repelled by their work; some even actively worked against the company’s goals.

Our research and experience suggest that most companies try to impart purpose in the wrong way – addressed by senior leaders at “town hall” meetings – creating a backlash, and leading to greater concerns.

We’ve identified “three Ps” of purpose. One, purpose must be plausible. If it is too lofty a goal and too far removed from an employee’s daily work, it is more likely to trigger cynicism than enthusiasm. Two, it must be permanent: it has to be part of an organisation structurally and systematically, rather than addressed on an ad-hoc basis. Three, purpose needs to be practical: making people feel motivated will only work if they also know what to do to achieve a purpose.

If these are implemented correctly, giving purpose can achieve much more than most managers realise – purpose becomes progressive, improving how an organisation functions. Let’s take a look at each in turn.

1. Purpose must be plausible

Company executives often assume they have to motivate employees by appealing to some higher altruistic purpose. This is likely why Lego wants to “inspire and develop the builders of tomorrow”; why Starbucks wants “to inspire and nurture the human spirit – one person, one cup and one neighbourhood at a time”; and why Airbnb claims that they are about “enabling people to make new friends in different cultures”.

However, a feeling of purpose does not necessarily come from higher societal goal – for most people this is too far removed from their daily reality. A feeling of purpose arises when employees are aware of the impact their job has on other people and the environment.

Consider the experiment conducted by Ryan Buell, assistant professor at Harvard Business School. In cafeterias, the chefs and diners usually cannot see each other. In his experimental cafeteria, Buell set up an iPad so that the chef could see the person placing the order. Buell and his team acted as observers in the kitchen. Customer satisfaction went up 14.4%, compared to a control group.

And simply observing their customers made employees feel more appreciated and more motivated. The researchers also noticed that the chefs began to work differently: rather then grilling several eggs in advance, they started preparing eggs fresh for each customer. The direct and plausible purpose of preparing fresh food was to deliver a higher-quality meal to a customer. By contrast, is it plausible for a Starbucks barista to “inspire and nurture the human spirit”?

In other research, Wharton professor Adam Grant focused on a team of 60 university fundraisers. A senior executive delivered a rousing, ideological speech to a number of fundraisers about the significance of education in society and the importance of their work to achieve that goal. Grant tracked the performance of each fundraiser for more than two months. He found no change at all.

By contrast, when a different group of fundraisers spoke directly with a scholarship beneficiary about the practical outcomes of the donations – how a scholarship had enabled them to attend university or study abroad – the donations they raised increased by 295%. The face-to-face interaction with students clarified the impact of their actions.

2. Purpose must be permanent

Company leaders often treat ‘purpose’ as a special ‘one-off’ conversation – a senior presentation at a meeting, a video of customer testimonials, or a scheduled outing to a clients’ premise. These special occasions are all well intentioned, but such ad hoc interventions are unlikely to have a lasting impact on employees. To have a structural influence on the work, purpose needs to be part of the daily routine, rather than a temporary disruption or occasional reminder.

Also, purpose is not always external to an organisation – it can concern fellow employees or other stakeholders. Consider Sadler’s Wells Theatre in London. About 10 years ago, new CEO Alistair Spalding noticed a disconnect between the theatre’s artists and support staff (the people who sell tickets, conduct marketing, prepare the stage, and so on). Staff morale was low, and there was a history of strikes. Employees’ attitudes toward artists was affecting performance preparations. Spalding reasoned that one underlying cause was that the two groups rarely met: support staff did their work during the day and the artists appeared at night to perform. Spalding decided to change this.

Because performers were mainly external, independent companies, Spalding decided to bring them into the building during the day. He started an ‘associate artist programme’, offering artists free office space, permanent access to rehearsal studios, cafeteria and theatre facilities. While they were not touring, the artists would come to Sadler’s Wells to practise, have meetings, and just hang out.

As a result, artists and support staff began to interact on a regular basis and work started to improve. The theatre’s artistic and commercial success improved, and audience figures were boosted from 360,000 to 470,000 in just four years.

Purpose needs to be built into the organisation on a structural basis. When people experience the impact of their work on a continuous basis, their work habits and routines adapt. Ultimately, this is how organisational performance begins to align with its purpose.

3. Purpose must be practical

Giving a sense of purpose is not just about motivating employees – it is also about providing direction. Employees have to want to do something; they also need to grasp what to do. For example, campaigns that motivate people to take up a healthier lifestyle are notoriously ineffective. People may see the purpose, but most are unable to make the change necessary. Adding concrete direction can make a sense of purpose work.

In Clarksburg and Bridgeport in West Virginia death rates are 13% higher than the national average. One health promotion focused on telling people “to live healthier” but also specifically targeted a switch from full-fat to low-fat milk. After the campaign, the market share of low-fat milk more than doubled. So, while people often find it difficult to change their behaviour to achieve an abstract goal, they can take action when purpose is combined with practical guidance.

Professor Claudine Gartenberg and a team at the Wharton school used 450,000 survey responses of worker perceptions of nearly 430 employers to construct a measure of corporate purpose. At first purpose seemed irrelevant and was not associated with higher firm performance. However, it was eventually seen that firms exhibiting a high purpose and high clarity experienced higher financial performance.

This is illustrated in the case of iconic British model train manufacturer Hornby. In the early 2000s, the company was close to bankruptcy. New CEO Frank Martin turned the company around by explicitly focusing on collectors and hobbyists, rather than simply making toys for children. He introduced customer contact through collector clubs and events. He declared the company’s strategic direction to be: 1) build perfect scale models; 2) for adult collectors; 3) that appealed to some sense of nostalgia. These three concrete choices explained what he wanted employees to work towards. In the first five years of Martin’s tenure, the company’s share price rose from 35 to 250.

Then purpose becomes progressive

When purpose is plausible, permanent and practical, it can be more powerful than many business leaders realise. A clear sense of purpose motivates and encourages employees to change their behaviours – and find solutions outside their normal routines – to better serve that purpose. This triggers creativity and innovation.

In research with Mihaela Stan, Assistant Professor of Strategy at University College London, we interviewed medical professionals and managers at in-vitro fertilisation (IVF) clinics in the UK. There are major commercial pressures in this competitive industry, but some doctors still have a clear sense of purpose. They love working with complex cases that require regular patient interactions, to learn about particular problems and the best way to treat them. They spoke to us about the thrill of “cracking a difficult case”.

By working with difficult patients, doctors starting experimenting with the treatment process. One IVF consultant said: “When you get a difficult case, with complex pathology, and the standard procedure simply doesn’t fit, what do you do? You change the practice, you start tinkering with the parameters … adjusting doses and sequences so that it fits.”

Our statistical models showed that these innovations enhanced performance with future patients too. Overall, it could improve the success rate of a clinic by more than 12%. Also, IVF specialists started meeting face-to-face to coordinate their actions. The enhanced communication improved people’s understanding of each other’s specialisms, prevented silos, and significantly increased – sometimes more than doubling – the overall success rate.

As these cases show, employees’ sense of purpose goes beyond a motivation to work harder. Purpose can also encourage individuals to innovate to satisfy customers, patients and wider stakeholders. And this means a more effective organisation.

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