There are two key arguments for the purpose-centered organization:
Purpose lends differentiation to a company
- In the eyes of customers
- In the lives of employees
- In the way various environmental stakeholders (example: governments, business and trade groups, press, etc.) view the company.
A company known for its strong purpose centricity evokes respect and ‘willingness to listen to its point of view’ from these various stakeholders.
This reduces transaction costs in getting business, helps maintain relationships, and creates a ‘halo effect’ around the commoditized elements of its offering.
At a deeper level, purpose transforms strategy, structure, and conduct of the firm
Strategy transforms because a purpose-led company moves from being a market-follower to become a change-leader since its motivation is purpose + profits and not profits alone.
Its decision criteria, its motivation set, and its reasons for opportunity engagement are radically different.
Structure transforms because purpose-led organizations tend to seek actualization of purpose, and not maintenance of hierarchies as the driver for organizational design/ development.
This has significant long-term impact on the ability of a firm to respond to new opportunities.
Conduct transforms because the nature of decision making shifts radically in purpose-led organizations.
An organization that operates in a high-change, high-growth environment, must be nimble and decentralized. This happens only when decision making criteria integrate value creation with wisdom.
A focus on value creation alone will lead to a strategic overstretch in time. A focus on wisdom alone will mean less opportunities to contribute and make a difference.
Purpose-led conduct builds in wisdom (flowing from purpose) with value creation (flowing from profit seeking).
What if an organization seeks to remain without purpose?
An organization that remains without purpose enters into a long-term spiral of decline into mediocrity.
The sequence of the decline is as follows:
Firstly, an organization without purpose will have employees without purpose.
Secondly, employees without purpose will act on transactional criteria alone. This means no real loyalty, no ‘ownership’ beyond that which delivers day-to-day results, and no commitment to customers (who are only profit cows).
Thirdly, an organization without deeper human dimensions, will drive away ‘sustainable growth’ seekers, and will soon chase people at the highest price. This means a decline into short-termism, mediocrity, and decision making that is bonus-focused, and not focused on the welfare of organization or country.
In the final stage, this will mean an organization that is a pale reflection of the practice in the marketplace – one which is neither respected nor valued by people who seek a higher dimension beyond money and power in their lives.
A little bit like the Roman Empire – a great organization destroyed by its absence of higher purpose.