Why you can’t ignore the importance of purpose in your business?
Purpose Matters – it’s fast becoming one of the latest buzzwords in the business circles. Many corporates & C-level executives understand the importance of having a purpose for their business.
In 2019, CEOs of top companies in the US signed a one-page declaration, lobbied by ‘The Business Roundtable’. The declaration concluded with “Each of our stakeholders is essential. We commit to deliver value to all of them, for the future success of our companies, our communities, and our country.”
However, there are many companies, which still ignore the need for a purpose and many more—who claim to have a purpose but limited on paper. In this two-part episode we will be talking about why corporates need a purpose and how they can incorporate it in its true sense.
Before we dig into it further let’s talk about what purpose means.
Traditionally, corporates defined purpose as the core reason that they were formed to serve, which would lead to higher profits for them. However, the world has changed tremendously in the last 2-3 decades. The purpose of a company is no more limited to just that. Purpose today refers to a company’s higher goals which will enable the company to serve the society along with meeting its target.
The corporate culture, which for a very long time ran on the principle of “shareholder capitalism” has received a lot of backlash in recent years. This has given rise to the need to have a higher purpose that goes beyond profit. If you are still not convinced, there are many more reasons why having a higher purpose is an absolute necessity for a corporate in today’s world.
Why is purpose becoming more important these days?
1. Build trust with your customers
I think this is one of the most obvious reasons. In the last few years, the customer demographics & psychographics—their needs, their desires & their values have changed considerably. Millennials who are increasingly taking decision-making roles demand much more from the companies they do business with or the brands they buy & stay loyal to. They are also more suspicious of companies using CSR as a marketing tool, so they want to see companies making a real impact. Creating real impact & communicating it with your customers can give a real boost to their confidence and trust in you.
2. Engage employees
Just as the customer demographics have changed, so are your employee demographics. If the company they work with has a strong purpose, employees get the opportunity to contribute to something positive and make a difference themselves. When employees have a higher purpose—it has proven to increase their engagement, commitment & pride they feel towards the company. Studies have also shown that purpose-driven companies also create an environment where employees are able to innovate more.
3. Higher attention towards SDGs
Social, cultural & environmental problems have always existed, but they have become much worse now and also much more pronounced. The entire world is looking at the SDGs & they have in many ways become a symbol of hope for many of us. The Sustainable Development Goals by the UN have managed to raise awareness around the many issues plaguing the world—created a sense of urgency to deal with it, and increased the scrutiny towards corporate practices.
4. Power of social media
There are approximately 3.6 billion social media users in the world who have almost real-time access to everything that happens in the world. In the last two years, the world has seen some of the biggest social media campaigns around the issues concerning the world—black lives matter, Amazon fires, and many more. In June 2020, after facing a backlash against racism on social media, L’oreal re-hired the model it had once fired for speaking against racism as part of their ‘Diversity Board’. This shows the power of social media and also awareness on part of the company to accept its mistakes & make amends. Currently, Facebook itself is facing a boycott from many brands & celebrities for its lack of social responsibility & abuse of power. These examples show that Social media has brought a level of transparency in the world & given power to people, which is unprecedented. A power people are not afraid to use.
5. Long-term sustainability
More than anything else, the truth stands that the world is at a crucial crossroads right now. If we as a planet want to survive and thrive in an equitable way, we need to look at long-term goals & not just at short-term profits. Companies that are able to accept this and adapt their values are much more likely to exist and run in the long term than the rest. Research by Harvard Business Review shows that companies that have a purpose do better in the market by at least 5-7%, they grow faster and they have higher profitability.
Having a higher purpose is a need strongly felt by the key stakeholders now and can help you appease your customers, employees, and ensure sustainable growth for your company. However, having purpose just as a slogan on your website or as a photo opportunity for your social media is not enough anymore. It needs to be an integral part of the company’s nervous system. That however is a topic of discussion for our next podcast, where we will talk about how you can make purpose and integral part of your company.