The Purpose-Led Board

For years, strategic planning exercises have started with articulating an organization’s Mission, Vision and Values. But these days, it seems that organizations have to dig even deeper to find their Purpose.

Recently I watched the movie A Dog’s Purpose on Netflix. It’s not a great movie, but I watched it for two reasons. First, I’m a sucker for dog movies. Second, it was filmed in and around Winnipeg, my hometown. It was fun identifying where various scenes were shot. Isn’t that 50’s diner Skinner’s? Isn’t that campus the University of Manitoba? Isn’t that field of golden waving wheat – well, that could be almost anywhere on the Canadian Prairies.

Anyway, the focus of the movie is the life purpose of a particular dog. (Okay, a dog who is repeatedly reincarnated, but let’s not get into that.) If a dog’s life has a purpose, surely so do the organizations that our boards govern.

An organization’s purpose answers the question, ‘Why?’ as in ‘Why do we do what we do?’ Today, let’s dig into this concept of Purpose, how it answers the Why question, and what it means for organizations, boards, and individual directors.

“All organizations start with WHY, but only the great ones keep their WHY clear year after year.” ― Simon Sinek, author of Start with Why

 

Mission, Vision and Values

During strategic planning exercises, I’ve often observed confusion and misunderstanding about what is meant by the terms Mission and Vision. Before examining what we mean by an organization’s Purpose, it’s worth taking a bit of a detour to get clarity on what these terms mean.

A vision is a mental model of a future state. It’s built on assumptions about the future and influenced by value judgments about what’s possible and worthwhile. Think of it as the destination - what the future will look like if the organization accomplishes its goals. It’s more than where the organization wants to be in the world, it’s also what it hopes the world will become because of its actions.

mission is what the organization does, who it serves and the road map to making the vision become tangible. It’s like an actionable vision statement — something that gives the vision legs and traction. It centers around why the organization is best suited for the job given the people it serves.

An organization’s values describe the desired culture, serving as a behavioral compass. When values are internalized by the people in the organization, they provide guidance on decisions, priorities and behavior.

 

Mission drives you. Purpose guides you.

Vision and mission are both important to an organization, but the piece that ties it all together is getting really clear on its purpose. So, what is an organization’s purpose? It is, quite simply, why the organization does what it does, why it exists, and why it serves a higher purpose. It goes beyond the mission, acting as a unifying principle driving everything the organization does.

“I want to discuss why a company exists in the first place. In other words, why are we here. … Purpose … should not be confused with specific goals or business strategies … . Whereas you might achieve a goal or complete a strategy, you cannot fulfill a purpose; it’s like a guiding star on the horizon — forever pursued but never reached.” – David Packard, co-founder of Hewlett-Packard

Vision is the picture, mission is the road map to get there, and purpose is the feeling that everyone has when you accomplish what you set out to do.

An organization’s purpose is best found by asking:

  • Why are you doing the work you are doing?
  • What problem are you solving, or what movement are you championing?
  • If you weren’t doing it, what would be the consequences?
  • Why do employees show up for this organization and not the one across the street?

The responses to these questions take an organization’s outward focus to a whole new level, not just emphasizing the importance of serving customers or understanding their needs, but also putting employees in customers’ shoes. The organization’s purpose says, ‘This is what we’re doing for someone else.’

When you hear people say, ‘I love my job. I love what I do. I love my company, and I love the people I work with.’, an inspiring organizational purpose is usually at the center.

“Studies show that over 80 percent of Americans do not have their dream job. If more knew how to build organizations that inspire, we could live in a world in which that statistic was the reverse — a world in which over 80 percent of people loved their jobs. People who love going to work are more productive and more creative. They go home happier and have happier families. They treat their colleagues and clients and customers better. Inspired employees make for stronger companies and stronger economies.” – Simon Sinek, author of Start with Why

 

The Social Purpose Company

Some organizations are going beyond the concept of being purpose-led, to defining their Social Purpose. The Social Purpose Institute describes the difference this way:

"The purpose company has an enduring core reason for being. It is clear and consistent about why its business exists, what it stands for and what it is about – beyond what it makes, does or sells.

"But a social purpose company goes further. It has an intent to create a better world in some way. It is an engine for good, creating social benefits by the very act of conducting business. Its growth is a positive force in society."

To define its social purpose, an organization needs to address questions such as:

  • What need do we fill in society?
  • Is there a wrong we are trying to make right?
  • Is there an injustice or condition we are addressing through our business?
  • How can we contribute to the greater good?
  • Why is the world a better place because of us?

 

Organizational Purpose and the Board

There is no doubt that purpose governance is rapidly rising as a focus for boards and executives, in large measure driven by COVID-19 and other issues such as systemic racism and growing inequality. For instance, in KPMG’s CEO 2020 CEO Outlook, three-quarters of Canadian CEOs said they need to re-evaluate their company’s purpose, and nearly two-thirds said their principal objective is to embed purpose into everything they do.

But the question remains, ‘Are they doing so?’ And what is the board’s role in ensuring that they do?

What is the role of a board of directors with respect to their organization’s purpose? How does the board provide oversight of the corporate purpose? How do directors ensure the purpose is driving strategy and culture? How do they know if the purpose is effectively implemented?

Purpose is becoming a global trend. To be effective stewards of their organizations, boards need to be clear on what it means to have a corporate purpose. Overseeing that purpose is an important role for the board. The directors need to be engaged in defining why an organization exists and ensuring the purpose is implemented.

To address these questions, Governance Professionals of Canada (GPC) convened a panel of visionaries and practitioners at its 2020 Governance Summit. Following are a few of the highlights listed in the Summary Report of the discussion:

  • The pre-eminent role for the board is to have oversight of the organization’s purpose and to make sure it is fit for the future.
  • “Profit purpose” is on the wane while “social purpose” is on the rise.
  • Social purpose reflects an evolution from a CSR (corporate social responsibility) approach that focuses on risk, to having a social purpose as the reason a company exists.
  • Once the board adopts or affirms the corporate purpose, it needs to ensure it is embedded in the corporate strategy and culture and in the overall governance mandate.
  • Boards set the tone at the top for delivering on the purpose, and need values, guard rails, and a decision-lens to ensure it is executed properly.

How can directors determine an organization’s best interests if they can’t answer the question ‘Why does it exist?’ A clearly articulated purpose is integral to how an organization creates value. It’s critical that the board leads the process of defining corporate purpose so it will be in a position to exercise business judgment and defend is decisions.

“People don't buy what you do; they buy why you do it. And what you do simply proves what you believe.” ― Simon Sinek, author of Start with Why

 

Purpose Statement

A well-crafted Purpose Statement inspires staff to do good work by expressing the organization’s impact on the lives of customers, clients, students, patients — whomever you’re trying to serve. The Purpose Statement connects with the heart as well as the head. Consider the following examples:

  • Disneyland (entertainment): To create happiness for others.
  • REA Group (real estate): To make the property process simple, efficient, and stress free for people buying and selling a property.
  • ING (financial services): Empowering people to stay a step ahead in life and in business.
  • Kellogg (food): Nourishing families so they can flourish and thrive.
  • AIG (insurance): To help people manage risk and recover from the hardship of unexpected loss.

A Purpose Statement should be a living document, revisited regularly to make sure it provides a powerful guiding light for the board and management. It should recognize the impact that a company’s operations may create at any stage of its operations, from creating products and services, to using them, to disposing of them. It can even be used to develop a strategy for addressing any negative impacts of the company’s operations.

A meaningful purpose needs to be expressed in a Purpose Statement that is authentic, inspiring and practical. Only then can the purpose unite the board, mold thinking and guide strategic decision making. It also shapes how the board understands its role and broader accountability. In a purpose-led company, the board needs to behave - and be seen to behave - in a way that respects and cultivates all the relationships on which the purpose depends, and through which the organization thrives.

 

Questions for Savvy Directors

In governing a purpose-led organization, directors need to ask questions that go beyond the numbers. To get to the heart of how management thinks, behaves and builds relationships, directors can ask questions like the following list adapted from Blueprint for Better Business.

  1. What does the organization exist to deliver and for whom? How does this differentiate it?
  2. How does purpose inform the organization’s values, strategy, operating model, measurement, incentives and reporting?
  3. How does purpose inform the way insight is collected, capital is allocated, assets are invested in and stakeholder propositions developed?
  4. How aligned is the board and management on purpose?
  5. What are some examples of how purpose is used to inform decisions such as discontinuing or promoting business lines?
  6. How is purpose used to evaluate and manage reputational and financial risk?
  7. How anchored in purpose are board discussions and agendas?
  8. What are some examples of how management has responded to people’s concerns in alignment with the purpose?
  9. What do people need to do to thrive in the organization?
  10. What positive and negative impacts does the organization have on society and the environment?
  11. How are we using the organization’s assets to contribute to society and maintain our social license?

 

Your takeaways:

  • An organization’s mission answers the question ‘What do we do and for whom?’ but its purpose answers the question ‘Why do we do it?’
  • An organization’s purpose is inspiring and gives meaning to employees’ jobs.
  • The board of directors provides oversight to the organization’s purpose and drives the development of a clear Purpose Statement.
  • Directors should ask questions that get to the heart of how an organization is fulfilling its purpose.

 

Resources:

 

Leave a comment below to get in on the conversation.

Thank you.

Scott

Scott Baldwin is a certified corporate director (ICD.D) and co-founder of DirectorPrep.com – an online hub with hundreds of guideline questions and resources to help prepare for your next board meeting.


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