Reading and talking about purpose feels almost tiring, some say. They roll their eyes by the sound of the term and put it off as a buzzword or nuisance – especially when Corona supposedly requires us to focus elsewhere. I understand that. I think that is short-sighted.
Purpose has been a topic of conversations and research across the globe for over a decade. And it should continue to be, as it provides orientation and motivation – especially in times of a pandemic and the aftermath of it, as also the recent Kienbaum Study (2020) suggests.
Purpose influences business & people
The study brings to light surprising findings regarding the impact of purpose on people and business. The results confirm the positive effect of a strong purpose on business performance, customer orientation and innovation which other studies had revealed in the past (compare HBR, 07/08, 2018 or 09/10, 2019). It also replicates effects on reputational and motivational aspects. Employees of a purpose-driven organization assess their employer as 50% more trustful and trustworthy than employees in organizations without a purpose. It is hence a business relevant tool and can be associated with distinct performance indicators and drivers.
Conceptual differentiation and wording of statement are unsatisfying
The study does provide clarity on existing short comings, too.
Two out of three respondents do not know the purpose of their company. This might be influenced by the fact that many companies use terms such as vision, mission and purpose interchangeably and do not differentiate clearly enough between the three (66%). Hence, confusion and ambiguity regarding the three concepts might contribute to an unclear and undifferentiated communication.
Also, the purpose statement is not stated as one - almost none of the examined purpose statements fulfilled the necessary quality criteria. Most purpose statement are generic and meaningless and hence need an improved and more differentiated wording. These findings correspond with my personal experiences when developing vision and purpose statements with clients. Most of them define the statements as indispensable – as in ticking a box. Yet, few care to invest the necessary amount of time and attention in getting it right.
Interestingly enough, almost half of the respondents (47%) working in midsize companies could not attribute a certain purpose to their employer. Apparently, a purpose-influenced school of thought has not yet populated the German Mittelstand.
One third of the surveyed participants confirm that their employer sells and distributes products and services which are not consistent and compatible with the stated purpose – allowing for the hypothesis that the defined purpose is not reliably understood and put into practice across functions.
Is purpose a topic for a certain elite?
The answer is partially yes: In the lower and middle salary segments more than half of the respondents were not aware of any purpose within their company. A majority of the lower (78%) and middle (60%) salary segment could not name the official purpose. Other tests demonstrated that popularity and awareness of the purpose decrease proportionally to salary level and seem almost non-existent in the lower salary segment.
Similar results prevailed with regards to educational levels: 65% of non-academic participants are not aware of the purpose debate and only 22% can name the official company purpose. Amongst participants with an academic degree, only 38% negate the debate and 51% can name the purpose. In conclusion, 68% of university graduates assign a purpose to their employer whereas a majority of 52% of the non-academic participants do NOT assign one. Hence, purpose does seem to remain a partially elitist concept and prevails in jobs with academic requirements and higher salaries.
So, what’s next?
As the HBR postulated in their 10/2019 issue, many companies consider purpose merely an add-on to their strategy, but the most successful companies put it at the core, using it to redefine the playing field and reshape their value propositions. And as Larry Fink (CEO of BlackRock) stating in his 2019 letter to the CEOs: “Purpose is not the sole pursuit of profits but the animating force for achieving them. Profits are in no way inconsistent with purpose — in fact, profits and purpose are inextricably linked.”
Hence, purpose will remain to be at the core of strategy development and execution. And surely, some companies will consider it a priority.
56% of the Kienbaum study respondents expect purpose to be communicated top-down. The results demonstrate that it’s an CEO or management matter. And the study results suggest that - in an ideal scenario - the HR function is involved more heavily than today in cascading purpose. There is room for closer cooperation and alignment between top management and HR.
The gap of transparency and involvement between leading and operational levels (or academics vs. non-academics), suggests a smoother and more consistent cascade by company leaders as well as an active involvement of all employees in communication initiatives.
Reflecting on the study and its’ conclusions it becomes evident that purpose continues to be a strategic priority – especially during the pandemic when employee motivation and engagement are harder to restore. A strong corporate purpose not only serves as a USP helping to differentiate from competition. As purpose is closely linked to corporate values, it also offers orientation, guidance and a broader aspiration to work for. Purpose can also function as a vehicle to activate and enthuse the workforce. A common sense of why to get up in the morning can generate a powerful momentum and constructive traction across functions, business units and regions. Especially during a pandemic.
A robust, representative study offering conclusions for the German market
In the 2020 Kienbaum study on purpose, more than 1300 participants were surveyed in Germany. The large majority of them were knowledge workers (92%) of which 63% completed an academic degree. 43% of the participants are in leadership positions. Accordingly, 33% can be attributed to a high salary segment (above 70K€), 28% to a middle segment (40-70K€) and 25% to a lower salary segment (below 40k€).
In sum, 32% worked in functional areas such as IT, administration or finance.
The main industries covered were: Healthcare (13%), Financial Services (13%) and Consumer Goods (9%). A significant share of 44% works in corporations or multinationals whereas 33% come of respondents work in midsize companies (German Mittelstand). Family businesses are represented by 24% of the participants.
The full study can be downloaded here: https://www.kienbaum.com/de/purpose-studie/