How does purpose accelerate organizational performance?
This was a central theme as more than 30 CEOs gathered in Boston for the 6th annual Center for Higher Ambition Leadership CEO Summit.
Anchored by small-group working sessions and thought-provoking talks, the event is a trusted forum where CEOs openly discuss the business challenges and opportunities unique to purpose- and values-driven organizations. Participants came away invigorated with new ideas and sharper thinking about their organizations’ purpose and strategies, along with new connections to help move their companies forward.
Purpose engages and mobilizes people to act – to drive stronger organizational performance and to go after larger societal challenges.
According to Harvard Business School Professor Rebecca Henderson, building trust with your people and engaging them in a clear vision and purpose is the secret weapon. You’ll be better able to attract talent and mobilize your employees to make your business successful for the long term.
And purpose is the key not only to business performance, but to addressing societal challenges as well. Our society faces big problems, and business leaders are in the best position to solve them.
CEOs at the Summit raised the loss of trust, accelerating inequality and polarization, and climate change as some of the current challenges. Henderson responded with ideas from her book, “Reimagining Capitalism in a World on Fire,” due out in May 2020. Henderson introduced a four-part map for how business can solve these challenges. It starts with single organizations, then expands out to partnering with and influencing others.
- Exploit Shared Value – Individual businesses can lead the way by finding and capitalizing on business opportunities that also create progress on broader societal challenges such as global health and environmental sustainability.
- Build Cooperation – From lowering emissions to paying a living wage, if competing companies come together to solve problems, no one will lose ground by doing the right thing.
- Rewire Capital Markets –Shifting investment priorities in a social sustainable direction make it easier for businesses to do the right thing, as well reduce systemic risks such as climate change, that threaten long term economic health.
- Rebuild Politics – Businesses and CEOs can take action to influence the regulatory environment and policymaking in ways that promote the greater good while preserving the dynamism of the market.
To read more on Rebecca’s talk, see this blog post from CHL Executive Fellow Douglas Wilson.
An authentic purpose connects you with your customers and unlocks discretionary energy in your organization.
DTE Energy CEO Gerry Anderson spoke with Professor Anjan Thakor (economist and author of numerous books on values leadership and growth) about his purpose journey. He shared a critical moment in 2008 during the global financial downturn and Detroit automotive crisis. Anderson was strongly urged to lay off employees to cut costs for the survival of the company. Instead, Anderson vowed to hold off as long as possible. He turned to employees for their ideas on how to make the company stronger and more efficient.
Once people connected with this goal, a tremendous amount of “discretionary energy” was unlocked. Employees became more engaged, more focused, and generated hundreds of new ideas and new ways to work that would help the business.
And as the company started to make headway, they expanded their focus to support communities in Detroit and across Michigan, supporting their customers on a larger scale. Talking to customers helped them identify that what mattered most to the organization was helping their communities, particularly Detroit.
As Thakor says, “You don’t create a purpose, you discover it.”
These efforts evolved into DTE’s current mission statement: “At DTE Energy our aspiration is to be the best-operated energy company in North America and a force for growth and prosperity in the communities where we live and serve.”
This dramatically changed DTE’s trajectory. Far from laying off employees, the company has grown. From 2008 to 2018:
- J.D. Power consumer ratings have been in the top two categories.
- Revenues grew by 300%, more than twice the industry average.
- Gallup employee engagement ranking in the industry went from the bottom 2% to the top 3%
To read the full story on DTE and other purpose-driven companies profiled by Thakor and his co-author Robert Quinn, read: “Creating a Purpose-Driven Organization,” (Harvard Business Review, July-August 2018).
CEOs who consistently demonstrate behavior in line with their organization’s purpose build long-term value with all their stakeholders.
Former Aetna Chairman and CEO Mark Bertolini shared his leadership story, featured in his new book: Mission-Driven Leadership: My Journey As a Radical Capitalist.
Bertolini is known for making bold, unexpected moves. One of his first acts as CEO was to cut earning per share guidance from 15% to 7% and shift focus to building long-term value. In 2015 he set the minimum hourly wage for all Aetna U.S. employees at $16 an hour– impacting 5700 employees. This move cost Aetna close to $20 million per year. But it also gave these employees a living wage.
Bertolini has made clear that Aetna is willing to invest in “the business fundamentals” in a bid to generate value over the long term. That has translated into spending tens of millions of dollars on the company’s workers—who, in turn, should now be positioned to offer a better experience for Aetna’s customers, leading to higher revenue. This creates a virtuous circle.
Following moves like this, Aetna saw much stronger financial performance. From 2010 when Bertolini became CEO to 2017, the company’s revenues doubled, and its share price went from roughly $30 to $180 per share.
According to Mark, mission is about charting a path that everyone can follow, even during times of turbulence. He calls it “vectoring through the storm.”
“This is not about altruism but necessity,” says Bertolini. “If we build stronger societies, we will have customers who are more able to buy our products and employees who are able to show up for work and not worry as much about other issues. Business leaders have the attention of their employee base and the platform to make real change.”