We originally published this on August 27, 2017. It remains relevant today.
Today’s volatile and complex global economy creates significant corporate risks that executives must effectively manage and resolve. The most prominent risks are financial and cyber threats. Others, though, such as leadership, strategic and succession planning and execution, team building, and corporate reputation, are perhaps less conspicuous but are no less ominous. Indeed, leadership is the greatest single risk facing organizations today – bar none! (See my January 8, 2016, post entitled CEO Performance and Board Oversight). Ineffective leadership can ruin even great companies over time.
The most successful leaders assess risks beyond the narrow imperative of robust quarterly earnings. Of course, profits are of the utmost importance for the success of their businesses; however, profits alone cannot be their single purpose. It is crucial how the money is made. Companies such as Amazon, Twitter and Facebook have implemented policies to avoid having hate speech associated with the products and services they allow on their platforms. These organizations realize that profits involving a social objective create a harmonious circle of prosperity between the company and society. They embrace a Purpose.
Ah, but what is purpose and why is it important for business leaders? Based on my experience with executives and the review of the best thinking on the subject, it is clear that purpose is a moral choice that principled leaders make to achieve something greater than themselves and the companies they lead. For some, it’s Social Responsibility (Toms and Starbucks), for other, it’s Excellence (Berkshire Hathaway), and for still others it’s Innovation and Discovery (Apple, Tesla and Virgin). Purpose inspires leaders to believe that their vision of the future is worthwhile and attainable, and it inspires others to reach for their dreams too.
Not all companies have a Purpose, and some succeed financially without it. However, the most successful ones understand that purpose is key for their prosperity over the long term. It creates a direction for their organizations, and it leads to better decision making on a day-to-day basis. Their leaders are Purposeful. They recognize that real risk mitigation requires more than drive, intellect and experience. They don’t ignore old assets and strengths; rather, they endeavour to create and foster new ones based on a deep understanding of their genuine professional and personal values, as well as their companies’ cultures. They realize that business is about creating lasting worth for all their stakeholders: shareholders, team members, vendors, customers, society and the environment. All are unique and interconnected in a vibrant community of purpose and prosperity.
Purposeful Leadership Circle
Each stakeholder complements the others synergistically. This leads to the creation of even greater value. Indeed, research indicates that there is a positive correlation between this type of corporate culture and profitability. Respected companies such as Southwest Airlines, Google, Costco, Tata, Royal Bank of Canada, Unilever, Nordstrom, Ecolab and Trader Joe’s have all shown that this way of doing business leads to multifaceted success over time, including higher profits.
When a company has successfully developed and deployed a clear and consistent organizational purpose, its culture becomes more closely aligned with that purpose. Then, goals, strategies, objectives and tactics are understood, embraced and acted upon more effectively and enthusiastically.
Executives who are successfully managing the volatility and complexity of the global economy have a strong sense of purpose. They embrace a reality greater than themselves and the companies they lead. They create a corporate culture focused on achieving effective, practical, sustainable and transformational results for the long-term. (See my September 6th, 2016, post entitled CEOs & Stakeholders’ Value Creation.) They choose service over short term self-interest.
Purposeful leaders have let go of old management paradigms. Supported by like-minded management teams, they inspire all their stakeholders by example to build a more coherent and prosperous enterprise that is far greater than its individual parts. Purposeful leaders are ethical corporate stewards focused on creating a meaningful, sustainable future both within and beyond their organizations.