This year when Larry Fink published his annual letter to CEO’s he titled it “A Sense of Purpose.” Fink is CEO of BlackRock — the world’s largest asset manager with over $5 trillion in assets, and every year CEO’s await his letter. But what can you do to help your company activate on his advice? As the pioneers of purpose, we have some solid advice we’ve built over the past 23 years.
“Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth. It will remain exposed to activist campaigns that articulate a clearer goal, even if that goal serves only the shortest and narrowest of objectives. And ultimately, that company will provide subpar returns to the investors who depend on it to finance their retirement, home purchases, or higher education.”
– Larry Fink, CEO of BlackRock
Last month, Larry Fink, CEO of BlackRock, sent a letter to CEOs. In it, he asserted that, “to prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”
The letter led to a predictable series of debates about how Fink’s view might sit with our old friend Milton Friedman. The common refrain in these debates that companies’ only obligation is to shareholder return completely misses the point, which is that purpose-driven firms outperform on shareholder return (a case for this is proven by the book Firms of Endearment). The zero-sum view of purpose and profit is an old paradigm, one it’s time to leave behind.
Nonetheless, now that the debates have (mostly) subsided, the question for boards and CEOs becomes how to move forward with the mantle that Larry Fink has charged them with. How, precisely, should they go about finding their purpose and turning that purpose into a positive contribution to society and a driver of sustainable performance?
First, a definition. Purpose captures why you exist as an organization, distinct from your mission (what you do) and your vision (where you’re going). It serves as the timeless North Star that aligns and inspires the company’s timely activities. A strong purpose is authentic, meaning that it is unique, distinct, and credible; aspirational, meaning that it expands the role you play in society and challenges you to deepen your impact; and aligning, meaning that it provides clarity and focus and serves as an edit-point for strategic decision-making.
Getting to a powerful purpose is a process, one that requires a deep dive into two particular questions:
- First, who are we?
At our best, what are the distinctive strengths of our company? What are the values, convictions, and beliefs of the people who make up the company? Why were we founded in the first place? When companies understand what they distinctively stand for, they can rise above a reactive, competitive mindset to more effectively stand out in the market.
- Second, what needs do we fulfill in the world?
Here we don’t mean just functional needs, but rather emotional and societal needs based on deep human insights. What meaningful impact do our products, services, and presence have on people’s lives? What would the world lose if we disappeared? When you understand the human needs behind what you do, you can build more compelling brands and more innovative products.
At the intersection of these two lines of inquiry lies your purpose – the reason for being that harnesses your unique strengths in service of a meaningful need. (For more on the process to get to purpose, see our white paper on Purpose with the Power to Transform.)
But of course, articulating purpose is just the beginning. To unleash its power, purpose has to be brought to life holistically across your organization’s culture, strategy, and branding. To embed purpose across an organization, we begin with the questions below:
Based on your purpose, who should you be recruiting, promoting, and retaining? What behaviors should you be recognizing and rewarding, formally and informally? What ways of working do you need to fully live your purpose? Is leadership embodying the company’s purpose and values?
Are your purpose, mission, vision, strategy, and values clearly and cohesively aligned? What innovation opportunities does purpose open up, and where should you be playing to best leverage your strengths in service of compelling customer and societal needs? And critically, how can you take your CSR activities off the sidelines and into the core of the business, to create social and environmental impact that is mutually beneficial? (For more on how to build societal impact into your strategy to drive performance, see Total Societal Impact: a New Lens for Strategy.)
As a company, are you wearing your values on your sleeve? Are external stakeholders able to easily articulate what you stand for and what makes you unique? Based on your timeless purpose, what timely needs in the market and society can your brand uniquely address to better connect with customers?
Organizations that put their purpose into practice across these dimensions outperform. They’re better able to attract, retain, direct, and inspire their employees, better able to create sustainable value for all stakeholders, and better able to attract customers with a brand that stands for something meaningful. Better able to, as Larry Fink put it, “achieve [their] full potential” – financially and socially. Surely that’s something Milton Friedman could get behind.