Thinking about the big picture: 3 questions shaping the journey to corporate purpose

It has been said a lot, but it remains true that in 2020 the world changed around us. The short- and long-term consequences for organisations of 2020 have been much discussed. As we settle into 2021, it is also useful to get our heads up and think about where we stand on some of the ‘big picture’ questions that shape how to start from purpose.

Here we identify 3 big questions that we think continue to shape the agenda for organisations seeking to find and embed purpose in 2021.

1. What is value? Why does it matter how we speak about it?

What we mean by value, and how it’s defined and calculated, affects every other decision we make – be that as individuals or as organisations. The turbulence of 2020, and the continued disruption to personal and professional lives, have led many to reconsider what they value most, and also the precise nature of the value that their organisations create.

There’s no reason, however, why we cannot redefine how organisations decide what ‘value’ means, and how to create it. As Colin Mayer points out, Milton Friedmann’s famous mantra of ‘maximising shareholder value’ is not a law of nature. It was popularised 60 years ago: a mere blip in the history of the corporation. And how we talk about value matters, because how we discuss economic value can affect what happens in the ‘real’ economy:

“How we discuss value affects the way all of us, from giant corporations to the more modest shopper, behave as actors in the economy and in turn feeds back into the economy, and how we measure its performance. This is what philosopher’s call ‘performativity’: how we talk about things affects behaviour, and in turn how we theorize things.” Prof Mariana Mazzucato, The Value of Everything

Things are beginning to change: only 7% of Fortune 500 CEOs said that business is solely about profit. At the British Academy’s Purpose Summit earlier this week, Shadow Secretary for Business Ed Miliband commented that we should consider a public discussion on what we want business purpose to mean, and this could certainly inform how we think about value within a business.

Can you put your finger on it? It’s time to get precise about what value organisations create, and how

2. Do you see your organisation as responsible to the wider world, or part of it?

Being a purposeful business means more than having a ‘social licence to operate’. There is a more fundamental question of where an organisation sees itself. Does its leadership recognise a defined responsibility towards society, making sure it meets its legal obligations, but still believing that this responsibility ends ‘at the factory gates’? Or does it recognise that it is embedded within the complex relationship of economic, social and environmental systems that make up our very human planet?

Organisations are starting to see that they are embedded within, are the product of, and have influence on these overlapping systems (as captured in the B Corp Declaration of Interdependence). Business schools are starting to respond, teaching students to engage with systems thinking and design thinking, challenging the leaders of tomorrow to dig down to the root causes of problems, not just to fix the symptoms that affect their operations.

When an organisation internalises that it is part of these overlapping systems, this unlocks the potential for transformative solutions as its ability to find alignment between its business model and genuine purpose increases significantly. Colin Mayer’s definition of purpose for the British Academy’s Future of the Corporation programme rings true here: “Profitably solving the problems of people and planet, and not profiting from creating problems.”

3. What are your time horizons for ‘success’?

The last few years have seen significant changes in how societies and communities decide what success looks like. From the Well-being of Future Generations Act in Wales, to the SDGs, new measurement agendas have started to shake the foundations that hold up economic growth as the main measure of societal progress. This argument is hardly new, nor is the debate settled, but again the events of 2020 have caused many to look again at the disconnect between the major economic indicators and the actual prosperity of both people and planet.

One of the main consequences of changing this outlook is that the time horizons for measuring success come under scrutiny. Chasing quarterly earnings reports, or quarterly GDP figures, is less relevant when the goal is to actually improve wellbeing or resilience in the long-term – be that for an individual, a company or a society. But when we choose to target the actual positive impact instead, our time horizons have to change.

And crucially, when it comes to profits, the way to measure success changes if we were to redefine success as the resilience to be a profitable business in 10 or 20 years’ time, rather than maximising profits this quarter.

Find the way forward: articulating purpose and measuring against it can help chart a course for long-term prosperity

Final thoughts

Purpose can set the direction for understanding these questions. Our three recommendations are:

• Start searching for and uncovering the value that your organisation seeks to create in the world, and how this aligns to your purpose.

• Stress-test whether this purpose-led value proposition also reflects an ‘embedded’ view of your organisation’s position in the world, and ask how it relates to stakeholders both inside and outside of the business.

• When reviewing goals, targets and reporting, assess how well these align with the actual time horizons for success in each case. If there’s a mismatch, explore whether this is because the timeline is wrong, or is the target not well aligned with what success looks like?