Purpose-driven organization

Purpose-driven organizations: “No pure altruism”

Companies with a clearly communicated purpose grow above average, are more innovative and productive, explains Niklas Schaffmeister in an interview with DUB UNTERNEHMER magazine. But not everyone is able to credibly live their purpose. Schaffmeister explains which companies perhaps have it easier with this and why a purpose-driven organization should remain in focus despite corona.

“What will be important in the future will be what ideal values a company or an economy represents and to what extent they contribute to the quality of life of people and the integrity of the environment”, says Harry Gatterer, Managing Director of the Zukunftsinstitut. If values are then consequently more important than the product today, the first question for Niklas Schaffmeister is. “Purpose-driven organizations do not create an either/or between values and product, but place a product in a larger, meaningful context”, says Schaffmeister. “A pure performance promise is no longer enough for customers today. From the consumer’s point of view, a company should take the global market environment into account and make clear the major challenges for which its product contributes to the solution. A corporate purpose should be an integral part of the value proposition so that the symbiosis of values and product works credibly.”

The extent to which the current return to values is becoming a trend also depends on a number of regulations – such as the CO2 tax. “In many other purchasing decisions, however, values have hardly played a role so far and not all product classes are covered by the trend.” Apple, for example, cooperates with the controversial contract manufacturer Foxconn, which is publicly criticised for its working conditions without this apparently having any effect on the purchasing decisions of Apple’s target group. “The brand’s desirability and unique position are obviously so high that even considerable deficits hardly dampen demand”, says Schaffmeister.

Purpose-driven organizations – profit maximization and meaningful work?

Purpose and capitalism are no longer incompatible opposites? “It is by no means the case that purpose-driven organizations establish a business logic that is committed to the common good out of purely altruistic considerations”, says Schaffmeister. “Our analysis shows that companies with a clearly defined purpose are more innovative and productive, attract talented employees more quickly and grow faster than average.”

In the past, he says, graduates of America’s elite universities were primarily attracted to the major consumer goods manufacturers and investment banks. Today, the best talents are more enthusiastic about innovative start-ups, tech companies “and especially companies that are committed to improving the state of the world”. In this respect, there is no contradiction between purpose and capitalism, but rather a new way of doing business, which is based on a higher corporate purpose.

“The combination of purpose and economic success leads to a new unity of society and economy, to an incipient transformation of the economy towards meaningfulness and sustainability. In this new order, companies that combine products in demand with clean business models are economically successful”, explains Schaffmeister. “In this respect, the essence of capitalism, namely a market determined by supply and demand, remains intact even in a sense-driven culture of economic activity. This succeeds above all because innovative technologies make this possible.”

Schaffmeister gives an example: there is no longer a reasonable reason to burn oil or coal. “Energy from sun and wind is inexhaustibly available to us as a substitute. The energy carrier hydrogen enables us to store this energy and use it flexibly and virtually emission-free.” In their innovation and transformation programs, more and more companies are preparing for the development and use of hydrogen technologies – even if this would ultimately mean having to completely rethink their current business model. “But they will probably also benefit greatly from this pressure to innovate.”

The importance of purpose-driven management has long since reached most CEOs. Schaffmeister recalls the “Letter to CEOs” by Larry Fink of Blackrock or the boom in sustainability reporting. “Even major reinsurers and far-sighted analysts have long known that an apparently good investment is not one in the long term if the world is thrown off balance, increasing insurance losses eat up profits or massive migrant flows change the prevailing political order.”

Should every company have a purpose?

There are, of course, companies that find it difficult to live a purpose credibly. If conditions are bad, a purpose statement can backfire. “The image of the industry can be a very critical factor for success. Moreover, the business model should be compatible with the message”, explains Schaffmeister. “Companies that position themselves in the luxury segment, for example, cannot easily develop a socially relevant purpose because their business model is based on exclusivity.” An oil company also hardly has the prerequisites for a successful purpose-driven company statement. To do so, it would have to completely change its business model.

With the Purpose Readiness Index, Globeone measures the extent to which companies are “purpose ready”. The result: a large number of the most popular German companies are not yet ready; some companies even suffer from a particularly negative perception in the relevant areas. Here, of course, the path to a credible purpose is more difficult.

“But there are first examples of large companies that are currently successfully pursuing this path. The tobacco company Philip Morris, for example, has formulated the goal of creating a smoke-free future. Their goal is to replace conventional cigarettes with alternatives that reduce harmful substances. The group has thus initiated a comprehensive transformation towards a purpose-driven organization and is further developing both its business model and its value chain”, says Schaffmeister.

Does one have to constantly adapt a purpose?

A corporate purpose should be a long-term promise, says Schaffmeister. Since a commitment to a superordinate corporate purpose intervenes deeply in the business model and value chain, such a statement should not be changed as often as desired. Nevertheless, a purpose is not necessarily part of a company forever: “If a company undergoes an enormous transformation, the purpose and business model usually change as well.” If a previously formulated purpose no longer fits the times, the modification of the purpose can help to return to a socially accepted and competitive business orientation.

Do family businesses have it easier?

In family businesses, the founding myth is firmly anchored in the DNA of the company. If the founding family is still running the company, there is usually a strong connection to the success story of the former founder. This often makes it easier to find a purpose and then to live it consistently, says Schaffmeister. “A clear vision from the founding days has usually been passed on, internalized and lived in traditional family companies over the years – and then usually flows into the purpose narrative.”

However, the values of many family businesses are often very static and dusty. “In this respect, the foundation of values is given a fresh boost in the context of Purpose projects. But of course: profits in family businesses are usually used in line with the traditional corporate purpose, no investors or shareholders talk into it. Family businesses therefore have advantages over listed companies with changing management boards and many more stakeholders when it comes to transforming into a purpose-driven organization.”

Is a purpose still important in times of Corona?

The last question in the interview is about whether a purpose in difficult times could not also stand in the way of the further development of a company. Schaffmeister: “A purpose remains important. The big problems of the world are still there. They remain virulent even in the current crisis, which will eventually be over, while the global challenges remain. Customers increasingly expect adequate answers from companies to the overriding questions.” However, credible solutions could also create competitive advantages and point the way out of the crisis if they led to innovative business models, new opportunities for differentiating offers and stronger customer loyalty.

“But purpose and transformation cost money”, says Schaffmeister. “In this respect, it is conceivable that some companies will have to slow down the pace. In the medium term, however, the issue of purpose should remain at the top of the agenda for most companies.” Anyone who does not take the topic seriously and does not want to integrate it into their business model would be better advised not to try to position themselves here in the first place. “Because purpose is not a marketing trend, but a strategic compulsion to adapt.”

Contact our Corporate Purpose Experts

DR. NIKLAS SCHAFFMEISTER

 

Managing Partner Cologne

Carina Hauswald

 

Managing Partner Zurich

SIMON ASCHERMANN

 

Manager Cologne