Deep Purpose

Ranjay Gulati

• Editore: Harper Business
• Anno: 2022
• ISBN:
  9780063088931
• Argomento: Negocios y empresa
• Categoria: Desarrollo empresarial

Forbes, Best Business Books of 2022

The Next Big Idea Club, Best Leadership Books of 2022

Thinkers50 Top 10 Best New Management Books for 2022

Axiom Award Bronze Medalist for Business Ethics

A distinguished Harvard Business School professor offers a compelling reassessment and defense of purpose as a management ethos, documenting the vast performance gains and social benefits that become possible when firms manage to get purpose right.

Few business topics have aroused more skepticism in recent years than the notion of corporate purpose, and for good reason. Too many companies deploy purpose, or a reason for being, as a promotional vehicle to make themselves feel virtuous and to look good to the outside world. Some have only foggy ideas about what purpose is and conflate it with strategy and other concepts like "mission, " "vision, " and "values." Even well-intentioned leaders don't understand purpose's full potential and engage half-heartedly and superficially with it. Outsiders spot this and become cynical about companies and the broader capitalist endeavor.

Having conducted extensive field research, Ranjay Gulati reveals the fatal mistakes leaders unwittingly make when attempting to implement a reason for being. Moreover, he shows how companies can embed purpose much more deeply than they currently do, delivering impressive performance benefits that reward customers, suppliers, employees, shareholders, and communities alike. To get purpose right, leaders must fundamentally change not only how they execute it but also how they conceive of and relate to it. They must practice what Gulati calls deep purpose, furthering each organization's reason for being more intensely, thoughtfully, and comprehensively than ever before.

In this authoritative, accessible, and inspiring guide, Gulati takes readers inside some of the world's most purposeful companies to understand the secrets to their successes. He explores how leaders can pursue purpose more deeply by

• navigating the inevitable tradeoffs more deliberately and effectively to balance between short- and long-term value;
• building purpose more systematically into every key organizational function to mobilize stakeholders and enhance performance;
• updating organizations to foster more autonomy and collaboration, which in turn allow individual employees to work more purposefully;
• using powerful storytelling to communicate a reason for being, arousing emotions and building a community of inspired and committed stakeholders; and
• building cultures that don't merely support purpose, but also allow employees to link the corporate purpose to their own personal reasons for being.

As Gulati argues, a deeper engagement with purpose holds the key not merely to the well-being of individual companies but also to humanity's future. With capitalism under siege and relatively low levels of trust in business, purpose can serve as a radically new operating system for the enterprise, enhancing performance while also delivering meaningful benefits to society. It's the kind of inspired thinking that businesses—and the rest of us—urgently need.

Chapter 1

What Is Purpose Really?

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Most leaders think of purpose functionally or instrumentally, regarding it as a tool they can wield. Deep purpose leaders think of it as something more fundamental: an existential statement that expresses the firm’s very reason for being. Rather than simply pursuing a purpose, these leaders project it faithfully out onto the world. In their hands, purpose serves as an organizing principle that shapes decision-making and binds stakeholders to one another.

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If you’ve got a sweet tooth, you might be a fan of the legendary entrepreneur Forrest Mars Sr., mastermind of products like the Mars bar, M&M’s chocolate candies, and Twix bars. The company Mars’s father founded and that his descendants now own, Mars, Inc., is one of the largest privately held firms in the United States, with 2019 revenues of $37 billion and consumer brands in a number of categories, including chewing gum (Wrigley), ice cream (Dove bars), pet food (Whiskas), and pet hospitals (Banfield).

Mars apparently was a tough-minded businessman who sought to squeeze out every last bit of profit from his business. “He was legendary for his extreme temper, and his fanatical behavior,” one journalist remarked.¹ At some point, and for reasons that remain murky, Mars’s perspective seems to have shifted and he became, dare I say, a man of purpose.

In 1947 Mars wrote an internal communication stating that the company existed “to promote a mutuality of services and benefits” among diverse stakeholders, ranging from consumers to employees, suppliers, and shareholders.² Mars clarified that “this expresses the total purpose for which the Company exists—nothing less” and stated his expectation that managers, the board, and employees “will be motivated by this basic objective, and will keep it constantly in mind as the guiding principle in all their work for the company.” Although Mars’s statement doesn’t reference communities or the planet as stakeholders, it remains an early and powerful expression of multi-stakeholder-oriented business.

In reflecting on Mars’s memo, you might wonder what an organizational purpose is precisely. The most compelling purpose statements among the hundreds I’ve reviewed have two basic and interrelated features. First, they delineate an ambitious, longer-term goal for the company. Second, they give this goal an idealistic cast, committing the firm to fulfillment of broader social duties.³ Transcending the selfish pursuit of profit or commercial advantage, the best purpose statements call upon organizations to render service to society or humanity in some way. Throughout this book, I’ll refer to purpose in the deepest sense as embodying these two dimensions—a goal that not just animates but elevates via the call to a higher, socially oriented duty.⁴ We can interpret Mars’s statement of mutuality as such a purpose, for it calls upon the company to deliver benefits for multiple players in its ecosystem, not just shareholders.

It’s unclear how far this memo galvanized Mars’s employees and leaders to extend a “mutuality of services and benefits” to stakeholders. We do know that in 1983 Forrest Mars’s children promulgated five principles that, as the present-day Mars website says, “form the foundation of how we do business today and every day.”⁵ The most recent version of this document, which one observer called a “bible of corporate rectitude,”⁶ includes one principle that seems to reference Mars’s original memo, reading, “We base decisions on mutuality of benefit to our stakeholders.”⁷ Other principles evoke the company’s intention to behave responsibly, deliver high quality, operate efficiently, and maintain financial independence, all with the goal of helping to “build a better world for generations to come.”

In recent years, Mars has become increasingly transparent and vocal about its purpose. During the 2000s and 2010s, reportedly under the influence of Mars family members and company chairman Stephen Badger, Mars sought to breathe new life into the concept of “mutuality,” developing it into a business philosophy that companies everywhere could embrace.⁸ The company took steps to make the five principles part of the culture at the company, posting them on the walls of its facilities and disseminating a booklet about the principles to every employee.⁹

Mars also adopted a formal purpose statement that emphasizes social good as a core part of doing business: “The world we want tomorrow starts with the business we build today.”¹⁰ The company reconfigured its brand around its purpose, creating the new role of global corporate brand and purpose director. But does Mars actually deliver on its purpose of creating a “better world”?

The answer is “yes, but . . .” Over the past decade, Mars took many steps to provide value for multiple stakeholders, in many cases emerging as an industry leader. The company’s “What’s Inside” labeling program voluntarily disclosed information about its products’ nutritional features, including fat, sugar, and calories. Mars became a leader in sustainability, adopting in 2008 its “Sustainable in a Generation” plan. In 2014, the company announced plans to build a wind farm that would provide enough power to run all of Mars’s US operations.¹¹ In 2017, Mars devoted $1 billion to its sustainability initiatives.¹² The company also embarked on a plan to slash two-thirds of its emissions across its entire value chain by 2050.¹³ Other initiatives included an “Economics of Mutuality” research program funded by the company’s think tank and an accelerator to help nurture new, socially minded food companies.¹⁴

Mars hasn’t just pursued its purpose peripherally—it has embedded it into its organization and reimagined its core operations to help create “the world we want tomorrow.” Still, the company’s transformation into a purpose-driven business is far from complete for a simple reason: the company still derives a great deal of revenue from selling unhealthy foods.

Defenders of Mars might contend that candy bars have social value because they satisfy people’s need for fun and pleasure. Be that as it may, many people would have trouble squaring the provision of treats with Mars’s lofty goal of making the world a better place. If Mars were really considering “every business decision through the lens of whether it is helping establish the tomorrow we want to create,” it would be making one decision above all, weaning itself off its reliance on confectionary sales and replacing these businesses with healthier ones.

Is it hard for a company to abandon successful products? Absolutely. But until Mars infuses its purpose more deeply into its strategy and shifts its portfolio of products accordingly, its commitment to a higher cause will seem less authentic and meaningful than it otherwise might.

Convenient Purpose

In truth, any number of firms adopt idealistic purpose statements, take a range of actions to serve society, and yet continue to sell products and services that cause serious harm to stakeholders. Depending on your moral perspective, firms that sell fossil fuels, tobacco, alcohol, junk food, weapons, and some social media services all fall into this category. These companies practice what I call “convenient purpose.” They articulate a core reason for being (usually framed as either a purpose or a mission statement) that extends beyond the pursuit of profits. Like Mars, the best of them take strong action to enhance communities, improve the lives of customers and employees, or benefit the planet. But their commitment isn’t sufficiently strong or broadly conceived to lead them to part with socially questionable, “cash cow” businesses.

We can discern other varieties of convenient purpose companies. Unlike Mars, some companies exploit a high-minded reason for being (as well as similarly high-minded mission, vision, and values statements) as cover to pursue egregiously selfish goals or even criminal activity. We can think of this as purpose-as-disguise. Elizabeth Holmes, the disgraced founder of the diagnostics firm Theranos, proudly proclaimed her belief that “you can build a business that does well by doing good,”¹⁵ while Theranos itself articulated a lofty-sounding mission: “to facilitate the early detection and prevention of disease and to empower people everywhere to live their best lives.”¹⁶ That didn’t stop Holmes from perpetrating a multibillion-dollar fraud that as of 2021 had her facing criminal charges. Other scandal-plagued companies like Purdue Pharma, Turing Pharmaceuticals, and Enron have also pulled from the purpose-as-disguise playbook, using lofty language to mask questionable, if not nefarious, conduct.

The vast majority of firms that don’t sell arguably harmful products or aren’t criminal enterprises likewise practice convenient purpose. Some practice what I call “purpose-on-the-periphery”: they adopt a purpose statement and take steps to deliver on it, only to treat these efforts as secondary to their core businesses.¹⁷ They divide their efforts into “doing good” through purpose-driven corporate social responsibility (CSR) and “doing well” through their core businesses, perceiving these as separate. They give themselves a pass on reimagining their businesses to serve a higher purpose, thinking it’s enough that they return some social value in the form of charity on the side. They fail to transform their operations to become more purpose-driven—more sustainable, more beneficial to local communities, more valuable to employees, and so on. Many convenient purpose companies practicing purpose-on-the-periphery also fail to engineer creative new products or services that serve a higher purpose while also generating profit. These companies take maximizing shareholder value as their primary measure of success, giving back just enough to maintain a veneer of respectability.¹⁸

In addition to firms that practice convenient purpose by treating their reason for being as peripheral, others fall short in a less obvious way. Some leading-edge firms aspire to re-engineer their core businesses to deliver value for both shareholders and society, what they describe as “win-win” solutions. In a seminal 2011 article, Michael E. Porter and coauthor Mark R. Kramer introduced the concept of “shared value,” which begins by recognizing that “societal needs, not just conventional economic needs, define markets, and social harms can create internal costs for firms.”¹⁹ Instead of writing off social harms as externalities for government to handle and regarding social imperatives as constraints or taxes on the business, the notion of shared value holds that companies’ policies and practices must contribute to both social and economic objectives at once.

Firms in many cases have misconstrued these powerful ideas, aiming only for the sweet spot where social and economic value intersect. In a practice I dub “purpose-as-win-win-only,” they focus exclusively on seeking creative solutions that overcome seeming dilemmas—desirable, win-win solutions that maximize both profit and social good. This application of shared value has an inherent appeal: you need not make tough tradeoffs when you operate in a world where you can simultaneously discover both social and economic value. This extreme view of win-win regards business as a magical place where you can always be your best self and satisfy shareholders. John Mackey and Raj Sisodia seem to articulate such a position with their notion of “conscious capitalism.” Conceiving of the various stakeholders as composing a single, broader system, they suggest that businesses must fuse “doing good” with “doing well,” arriving at integrative solutions that expand the overall pie and benefit all stakeholders simultaneously.²⁰

Leaders of firms that pursue purpose-as-win-win-only are far ahead of their peers, pushing purpose into the core of what their companies do. But as we’ll see in the next chapter, they still don’t do it as fully as they might. Companies exclusively pursuing win-win solutions tend to deliver on their purposes only to the extent that a perceived win-win is possible—which it often isn’t. Forced to choose between financial performance and social good, leaders at these firms usually wind up operating the enterprise for shareholders’ primary benefit. Although these leaders strive to serve society, they tend to perceive shareholder value as a performance baseline or nonnegotiable, and social value and purpose as (sometimes) negotiable. They limit their pursuit of social value projects to those where the economic payoffs are also clear. To this extent, we can describe these firms’ commitment to purpose as “convenient.”

As my analysis suggests, practitioners of convenient purpose are not morally equivalent. We can and should rank these companies relative to one another. On the bottom level we can place the Theranoses of this world, companies that exploit social purpose for clearly nefarious ends. Next, we can place companies that relegate purpose to the periphery of their operations, whether because they sell inherently harmful products (depending on your moral viewpoint) or because they follow a conventional approach separating CSR from their core operations.

At the highest level of convenient purpose, we find companies that practice purpose-as-win-win-only. Committed to transforming capitalism, these companies embrace a multi-stakeholder approach, consciously seeking to go beyond CSR. They energetically pursue business opportunities that deliver value for society and shareholders. But despite their ardent commitment, they often can’t innovate perfect win-win solutions. In these instances, the financial performance of the company or its ability to deliver for customers trumps a focus on other stakeholders. Rather tha...