In the wake of the Banking Royal Commission companies are taking a step back to examine their organisational purpose, writes Jon Williams, who explains that there are 5 specific questions companies should ask customers in this process
The current and post-Royal Commission environment in Australia, with the damage done to both corporate and personal reputations, has seen an upswing in focus on organisational purpose. The argument runs that if only organisations had held true to their purpose, instead of narrowly chasing customer outcomes or personal or organisational profit, they wouldn’t have committed the sins of customer patient/stakeholder mistreatment that they did.
Unfortunately, this isn’t the first time we have been here. Purpose was the topic de jour 20 years or more ago when a wave of activity washed through corporate Australia as organisations followed the then new fad for defining organisational purpose, mission, vision and values. Although no-one could quite agree on what each of these terms meant, or how they overlapped, they became all pervasive in the boardrooms and on the websites of corporate Australia.
Sadly, the events of the past 12 months would seem to suggest that this work didn’t have the lasting impact people originally hoped for. Why? Well, because despite the brave words no one needed to actually do anything differently as a result of all the bold statements of intent that were created. Whilst business conditions have waxed and waned in the succeeding years and although cost reduction and productivity waves came and went organisations have mostly continued on their merry way.
In spite of their professed purpose, mission and vision, to a very large extent mining companies kept maximising profit from mining, insurers from insuring, retailers by selling stuff and so on without any reference to the broader impact they were having.
“The events of the past 12 months would seem to suggest that this work didn’t have the lasting impact people originally hoped for”
A renewed focus on organisational purpose
So, will the new focus on organisational purpose, this time driven by a response to negative external scrutiny make a difference?
We believe it can, but only if organisations manage to avoid falling into the trap of confusing “purpose” with “corporate social responsibility”. Too often an attempt to prove they are good corporate citizens leads to organisations developing a separate “social purpose” which is essentially an attempt to develop a separate declaration of good works, whilst allowing the company to carry out its core business much as it always has. That’s not what organisational purpose is.
Instead, purpose should be an understanding and description of how the organisation fits into its ecosystem, its place in the World, and therefore how and why it needs to look after multiple constituencies to ensure that the whole system stays healthy. And in understanding their place and what to do to maintain balance organisations can actually be more successful.
What else is different from twenty years ago? The rise of social media has profoundly changed the relationship between the real nature of an organisation’s purpose and its critics. Previously it was possible to keep running a business for pure profit whilst having a “good corporate citizen” overlay through sponsorships, charity support and sustainability initiatives. The increased transparency afforded by social media around the behaviour of leaders in organisations, the impact of policies and the experiences of customers means that this will no longer work.
Every interaction or policy that clashes with the declared organisational purpose is now only one click away from being a trending topic. Where once employees and customers would suffer in isolation and ignorance now information can be spread, collated and create it’s own head of steam. In this environment the only possible defence is to actually believe in your organisation’s purpose and hold everyone from CEO to customer service rep accountable for delivering it. With all of the complexity that this entails.
“An exclusive focus on shareholder return can lead to organisational behaviour that is damaging to other stakeholders and ultimately the organisation and its reputation”
The organisations that do this may not avoid all the pitfalls of human behaviour, but they are more likely to dodge some and recover more quickly from their mistakes.
We are confident that we are entering a period of great opportunity for organisations that are prepared to seriously embrace a more sophisticated understanding of their purpose. And a period of gradual decline for organisations that are focused on a “laminate and pretend” approach. Boards and leaders get to make that choice, but in an era of diminishing trust those that make the wrong choice will be judged harshly.
5 questions to discover organisational purpose
Organisational purpose provides balance to the question “why does our organisation exist”, by going beyond the answer “to generate shareholder return”. An exclusive focus on shareholder return can lead to organisational behaviour that is damaging to other stakeholders and ultimately the organisation and its reputation. Conversely an overlay of “social responsibility” without truly embracing and understanding the impact of the organisation leads to cynicism and a gradual fall in trust.
However, too often, organisational purpose statements end up being marketing speak or catch-phrases describing how the organisation is going to save the world, whilst also being a successful business.
Instead organisations should search for a balanced view of the role they play in society and provide a narrative which gives meaning to the many things that the organisation and its people do.
Some questions to ask your customers and people on your way to an organisational purpose:
- What important role does our industry or product play for society?
- What do we add that is different or unique relative to the other players in the industry?
- Who are we important to and what do they expect of us?
- What would these people lose or miss out on if we didn’t exist?
- How can we describe this complex combination without setting unrealistic expectations?