‘Purpose’ is the preachy new CEO buzzword

January 27, 2014 1:42 pm

‘Purpose’ is the preachy new CEO buzzword

By Andrew Hill

Leaders need a good explanation when reality clashes with values to which staff are committed

When Ellen Kullman, chief executive of DuPont, asked a contract worker on the production line making Kevlar, the fibre used in bulletproof vests, what he was doing, she got an unexpected response: “We’re saving lives.”

The comment underlined her conviction that a sense of purpose was far more effective at hiring, motivating and keeping staff than any corporate brand, vision or mission statement.

She was not the only chief executive at the World Economic Forum last week to use the term “purpose”, as business slowly battles to restore public trust. In making any company more resilient, “the most important thing is to focus on purpose,” said Brian Moynihan, who is wrestling Bank of America into post-crisis shape. “You have to be a purpose-driven organisation,” added Mark Weinberger, head of EY, one of the Big Four professional services groups.

But even chief executives differ on precisely what purpose is. If it cannot be expressed easily, I doubt they will make it stick. Yet if it can be boiled down to a general single sentence, to fit the many mundane tasks a company and its staff have to perform, I wonder how it differs from the much-derided, meaningless mission statement (Acme Widget: Meeting the Unmet Needs of Customers Everywhere).

One difference is that whereas chief executives (particularly new chief executives) can change missions and visions on a whim, purpose is far harder to shape. That is an advantage – if you can harness your company to your younger employees’ search for meaning at work, you will gain their loyalty – but also a pitfall. For one thing, as young employees grow up, their reasons for going to work will change. For another, as Asia experts at Davos reminded me, in some faster-growing markets such as China, the imperative for workers to make money easily trumps purpose. If the Kevlar worker had responded “I’m earning a decent wage to feed my family”, would it have meant he was any less motivated to do a good job?

Another reason that purpose is double-edged is that it gives off a whiff of the sacred. But a purpose that sanctifies work can also quickly become sanctimonious. Precisely because purpose is important to workers and customers, they will be quick to punish executives who appear to diverge from its path. When academics Sandra Cha and Amy Edmondson studied a maverick advertising agency with a charismatic leader a few years ago, they were surprised to discover that the same employees who had joined the company for its idealistic set of values were highly critical of its boss because they believed he was not living up to them. One reason was that the staff were interpreting the group’s purpose slightly differently – and more broadly – than the chief executive intended; the researchers called it “value expansion”.

One lesson is that even if purpose is more powerful than the old motivational methods, CEOs need a good explanation to hand when corporate reality clashes with the high-sounding values to which their staff are committed.

Facing such challenges, some chief executives must be tempted to return to simple pursuit of profit, or to assume that merely making good products well is sufficient. But such an attitude will not narrow the trust gap between business and the public. Unreliable products and services will undermine confidence in companies but customers and staff want companies to live up to higher standards of behaviour, too.

Dov Seidman, a consultant and advocate of “principled performance”, points toJohnson & Johnson

’s 70-year-old “credo” as a model. It states that the healthcare company’s first responsibility is to the doctors, nurses, patients, mothers and fathers who use its products and concludes: “When we operate according to these principles, the stockholders should earn a fair return.” He is suspicious of companies that use purpose for marketing or recruitment. “I want to know who is doing it to make money, and who is doing it because it is who they are,” he says.

As Ms Kullman points out: “We had a vision and a mission and nobody understood what they were.” But the appearance of purpose in Davos-speak is a warning to executives that it could suffer the same fate, hollowed of meaning by a combination of overuse, abuse, breach of corporate promise and general cynicism.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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