This article originally appeared on Forbes.com.
It’s easy to think of corporate purpose as simply nice to have―inspirational for a moment, perhaps, but ultimately not much more than words on the home page or in the boardroom. In truth, purpose has never been more important. Covid-19 thrust corporate purpose to the forefront, showing how critical it is to any organization’s ability to change.
People are looking for connection and a higher sense of mission in what they do. A Bain & Company survey of nearly 1,000 global employees of companies of all sizes conducted during the early months of the pandemic found that among employees whose satisfaction with their company had increased, 86% reported that their employer has a purpose that its people are passionate about and find meaningful.
A focus on purpose gives companies a leg up in an ever-changing world. Bain research found that purpose is one of nine elements critical to a company’s power to change, and that companies with a higher change power have more engaged employees, stronger leaders, and faster growth.
So how should we think about purpose? What is it and how do executives develop a good one? Once narrowly defined as increasing profits, today corporate purpose has evolved to be thought of in far broader terms. Companies must still meet the goals of shareholders, but they must also satisfy those of customers (who increasingly demand products that reflect their values), of employees (who want their work to have meaning), of their ecosystem of business partners, and of society itself as we grapple not only with the immediate trial of the pandemic, but with long-term environmental and social challenges as well.
An effective corporate purpose clearly links to business strategy. Purpose affects how a company generates financial value and how the market perceives it. It influences company culture, how people work and behave. A good one inspires the organization in a way that unleashes discretionary energy and creativity, and culminates in concrete action.
One way to think about purpose is as the reason a company exists―the thing that gives meaning to employees’ everyday work. It should support the CEO’s vision and strategy, but purpose is also a long-term notion: What you want to stand for over the next half-century? This is the topic of a recent publication by my colleagues Marc Berman, Jenny Davis-Peccoud, John Hazan, Adélaïde Hubert and Tracy Thurkow, “Giving People Hope by Reigniting Your Company Purpose.” In it, they advise companies that haven’t started thinking seriously about their purpose to begin with these four steps:
- Study what the organization has learned about itself during the current crises. What brought employees together, made them proud of their organization, and deepened their engagement?
- Capture this rediscovered purpose. Companies can formulate their purpose statement in a way that encapsulates what the company, its employees, its customers and its wider community want to support and achieve over the coming years.
- Communicate the new purpose statement across the company in a way that engages employees’ heads and their hearts.
- Adapt it in a manner that works with business reality, including the company’s processes and its opportunities to empower employees.
Once codified, executives must bring the purpose to life, make it more than words, and ensure it flows through and influences strategy, behaviors, and priorities. It will require investment.
A clear purpose holds corporate change together. It acts as a compass, reliably pointing to the right decisions and action to take. Consider Netflix. Fueled by home confinement and popular programming, the streaming entertainment pioneer has enjoyed growth in paid subscribers from 167 million at the start of 2020 to 203 million as of December. At the same time, it’s had to be incredibly flexible, moving computing-intensive operations―everything from post-production to animation―into employees’ home offices, living rooms and kitchens when Covid-19 hit.
How has it simultaneously managed so much disruption and growth? Executives credit the company’s culture of local decision making and its employees’ focus on service quality and on finding quick, practical solutions to problems as they arise. Netflix’s culture ties closely to the company’s well-understood corporate purpose: to entertain the world. That purpose dates back to the Silicon Valley company’s early days, and over time has supported repeated reinvention, adaption, and innovation.
The work put into defining a corporate purpose and bringing it to life will bear dividends over the long term. As change becomes more pervasive and companies’ employee bases more diverse, there’s a strong need for a unifying anchor that provides context and focus. Purpose creates an important sense of belonging and attachment. It’s not a slogan, but rather the thing that defines and guides action. During periods of crisis, purpose proves its worth, but it’s a competitive advantage whatever the business cycle.