A study conducted in 2016 aimed to assess 500 000 employees’ perceptions regarding their organisations’ corporate purpose. Results indicated that there exist two types of high purpose organisations:
- Organisations characterised by high togetherness between employees; and
- Organisations characterised by high clarity from management.
Results indicated that those organisations exhibiting both high purpose and clarity had systematically higher future operating financial performance and return on assets, even after controlling for current performance.
When the current CEO of USA-owned electric services company, DTE Energy, Gerard Anderson, began in his position, he did not believe in the power of high organisational purpose. It is important to state that organisational purpose is not the same as an organisation’s mission that focuses on how the organisation will be successful financially. Organisational purpose is aspirational and encapsulates how employees are making a difference.
Unfortunately, as seen with Anderson, many leaders do not believe that organisational purpose belongs with the economic aspects of an organisation. Once the Recession in 2008 hit, Anderson realised he needed more commitment from his employees. Unfortunately, prior to this event, surveys had shown that the workforce was already largely disengaged.
It was at this time that Anderson was invited by Joe Robles, then the CEO of United Services Automobile Association (USAA), to come and see the USAA call centres. Expecting to see people simply going through the motions of their everyday work, he was shocked to find positive and fully engaged employees. When Anderson asked how this could be, Robles answered that a leader’s most important job is “to connect the people to their purpose.”
Robles explained that all employees underwent an intense four-day cultural orientation and that lessons were continually reinforced through different platforms. These platforms enabled employees to ask questions and share ideas about how they can fulfil their purpose.
Upon his return to DTE, Anderson made a video articulating his employees’ higher purpose. The first group of people to watch the video gave a standing ovation and some were moved to tears. Never before had their work been framed as a meaningful contribution to the greater good. DTE’s leaders dedicated themselves to supporting that purpose. As employees perceived the purpose to be authentic, a transformation began to take place. Engagement scores increased and DTE received a Gallup Great Workplace Award for five years in a row. Financial performance also improved with DTE’s stock price more than tripled from the end of 2008 to the end of 2017.
This case study sheds a lot of light and reflects the mindsets of so many leaders. As soon as one only applies economic logic, you start to perceive your employees as self-interested agents, and design practices accordingly.
Many executives avoid working on their organisations’ purpose. Why is this? Because it defies what they have been taught in business schools and through experience: that work is largely followed by the book and that employees will exert the least effort possible. Results have shown how although a higher purpose does not guarantee economic benefits, it has a positive impact on both financial and employee performance.
Gartenberg, C, Prat, A., & Serafeim, G. (2016). Corporate purpose and financial performance. Harvard Business School Working Paper, No. 17-023. Retrieved from http://nrs.harvard.edu/urn-3:HUL.InstRepos:30903237.
Quinn, R.E., & Thakor, A.V. (2018). Creating a purpose-driven organization. Retrieved from https://hbr.org/2018/07/creating-a-purpose-driven-organization.
Serafeim, G. (2018). Facebook, BlackRock, and the case for purpose-driven companies. Retrieved from https://hbr.org/2018/01/facebook-blackrock-and-the-case-for-purpose-driven-companies.